Do you have a first and second loan on your home? Having trouble making the mortgage payments due to a financial hardship? The federal bailout for borrowers now offers a program to help those facing imminent default. Homeowners facing financial hardship may qualify for help on their second mortgages with the federal loan modification plan enacted by President Obama. The very aggressive loan workout program is aimed at reducing mortgage payments so that borrowers can avoid foreclosure and stay in their homes. This plan is extended to include second trust deeds. If you have a second mortgage, here is some helpful information on how to apply for a loan modification using this program.
This is a voluntary program, but most lenders are expected to be participating. The Treasury Department will pay banks up to $1500 for each qualified mortgage that is modified under the program. That is a big incentive to get the lenders to offer help to desperate homeowners. In addition, borrowers will be paid-for-success under this plan. Eligible homeowners will receive $500 upfront and $250 for three years as long as they do not re-default. This bonus payment will be credited towards the loans outstanding balance.
A loan modification on a second loan under the federal plan could include lowering the interest rate to 1% for five years to achieve an affordable and sustainable payment. The government may subsidize part of the participating banks losses caused by the new loan terms. Another option under this federal loan workout involves paying the bank that holds the second lien up to 12 cents on the dollar to retire the debt. This will be at the banks sole discretion and is not mandatory.
Homeowners who have lost a lot of value due to the housing downturn may be offered a loan workout that includes forgiving or deferring a large chunk of their second loan balance. Many homeowners who are underwater are simply deciding to give up their home-adding to the mounting foreclosure problems. The idea is to encourage borrowers to keep making payments by helping to reestablish a more equitable position on their home loan. Although not everyone will be given this option, it is being offered more frequently. Be sure you contact your second trust deed holder to inquire about the possibility of forgiven or deferred principal.
Interested homeowners will be asked to prepare a loan modification application and provide evidence of a financial hardship situation. A determination will be made based on this information, and qualified homeowners will be eligible for this aggressive program. A successful borrower will be able to submit a complete and accurate application that meets the requirements for approval. Make sure you understand how to prepare your paperwork before contacting your lender. Trying to prepare your own accurate and acceptable financial statement can be frustrating and confusing. Take advantage of the new Loan Mod Quick App software program to help you with your application. SImply input your own financial information and the software will do all the calculations for you. Why take chances with your home? A new lower payment could be the solution you need to stay in your home-make sure you take the time to do it right.
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