Mortgage Loan Modification Programs

If you’re struggling to make your home loan payments you may be eligible for a loan modification. Here are some mortgage loan modification programs that are available today.

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Homeowners having trouble making their mortgage payments may qualify for one of several government mortgage loan modification programs. Even if you meet the criteria, the lender still decides whether to modify your loan.

Hope for Homeowners

The Hope for Homeowners program provides homeowners with a new 30-year, fixed rate FHA-insured mortgage. Homeowners refinance their current mortgage with the new loan. Participation in the program is voluntary for both borrowers and lenders. Meaning you can apply for the program, but your lender can turn down your application, even if you meet all the qualifications. The Hope for Homeowners program ends on September 30, 2011.

There are certain factors you must be to be eligible for the program. The mortgage you wish to modify must be on your primary residence and you’re not allowed to own any other properties. Your mortgage must have originated before January 1, 2007 and you’ve made six full payments on the mortgage since that time. Your current mortgage payments should be more than 31% of your gross income and you cannot make payments with any help. Your net worth should be less than $1 million dollars, you have not been convicted of fraud, and you haven’t intentionally defaulted on a mortgage or any other large debt within the past five years.

Home Affordable Modification Program

The Home Affordable Modification Program (HAMP) is effective for mortgages that originated before January 1, 2009. The program will be in effect until December 31, 2012. HAMP allows those homeowners who are eligible to modify their loans so their monthly payments would be no more than 31% of their gross income. The FHA insures new refinance loans and only requires lenders to reduce the loan balance to 93% of the balance vs. the 90% under the Hope for Homeowners program. The FHA also pays the lender $1,000 for each loan they refinance through the program.

To be eligible for the program, homeowners have toshow they’re experiencing financial hardship. They can be in several stages of delinquency, including foreclosure or bankruptcy, and may even be current on their payments. Current housing expenses must be more than 31% of the homeowner’s monthly gross income. HAMP is a voluntary program for lenders. If you’re interested, you must talk to your lender. If you don’t qualify for HAMP, lenders must consider you for the Hope for Homeowners program as well.

Second Lien Modification Program

If you have a second mortgage on a property for which the primary mortgage was permanently modified through HAMP, then you may qualify for the Second Lien Modification Program (2MP). Under the program, you may be able to have your second mortgage modified or receive a principle reduction. Your HAMP modification payments can’t have become delinquent for more than three months. Your second mortgage should be between $100 and $5,000. Lenders choose whether to participate in the program and may have more strict eligibility requirements than the ones listed above.

Principle Reduction Program

Through the Principle Reduction Program, your lender voluntarily agrees to reduce the principle on your mortgage if the value is significantly less than the balance on the mortgage. Fannie Mae and Freddie Mac mortgages don’t qualify for this program. You must currently live in the home that’s secured by the mortgage and the mortgage must have originated before January 1, 2009. Your monthly mortgage payment should be more than 31% of your gross income and your mortgage balance can be a maximum of $729,750. You must be able to afford the modified payment. The program is in effect from October 1, 2010 until December 31, 2012.

Lenders may have their own modification programs. If you’re behind on your mortgage, talk to your lender about what loan modification options are available for you.