Summary of the New Obama Loan Mod Plan
There has been much written about the New Mortgage Modification Plan. However, few people understand how it actually works. This is the most straight-forward explanation we've found. We've summarized a few points below...
- People who can afford their mortgages will get little help.
- You must be able to illustrate "hardship".
- The loan must be on your primary residence.
- The first lien cannot exceed $729,750.
- The objective is to get your monthly payment down to 31% of your before-tax income.
- Your rate could be lowered to 2%, but only if necessary to get your payment to the 31% level.
- Your loan could be extended to 40-years, but only if necessary to get your payment down to 31%.
- Cram downs or principal forbearance could occur, but only if the rate/term changes aren't enough.
- KEY POINTS: Your payments will go back up again after five years.
- YOU STILL OWE ALL THE MONEY AND MUST PAY IT BACK IF YOU SELL OR REFINANCE!!!!
Bottom line, this is NOT a get-out-of-jail-free card. It is a temporary fix.
We have received dozens of calls from clients thinking they can take advantage of this program to lock-in low rates, get out from under their upside-down mortgage, or somehow make their rental property affordable. That is NOT what the program is about. Very few people will qualify and again, YOU STILL OWE ALL THE MONEY AND MUST PAY IT BACK!!!