Obama's Loan Modification Proposal - Making Things Easier For Many

Obama's loan modification proposal was made in order to combat the steadily declining housing market and the equally rising foreclosure rate on homes. The housing market is the worst it has been in years, and current and potential homeowners are at a loss on where to turn. Those who own homes are having trouble affording their monthly mortgage payments and foreclosure is right on the horizon, while those looking to get a home are having difficulty getting approved or finding homes that fit their needs.

Obama's loan modification proposal comes along with a refinancing plan, as well as more minor plans to try to stimulate the housing market.

The loan modification proposal injects $75 billion dollars into lenders around the country to encourage them to approve loan modifications and to be more willing to work with homeowners on their mortgage rates. Under the proposal, the Home Affordable Modification Program was instated and is now in effect. Under the Home Affordable Modification Program, loan modifications can do some or all of the following for homeowners:

Reduce the principal balance on their mortgage.

Lower the interest rate on the mortgage and in turn, reduce monthly payments.

Convert the high adjustable interest rate to a more affordable fixed rate.

All late fees and charges will be wiped clean.

Avoid impending foreclosure.

Naturally, even under a more lenient home modification plan, there are strict rules and regulations as to who can qualify for home loan modification. Each lender has their own criteria for loan modification, but they all basically look at the same areas in different ways. When a homeowner is applying for loan modification, the lender could look at:

The current value of the property and the value when it was initially bought.

The homeowner's credit score.

Whether or not the homeowner has filed for bankruptcy in the past.

The homeowner's current financial situation to determine if they are in financial hardship or not

The homeowner's mortgage payment history.

These are not all of the criteria a lender can look at, but almost all lenders look at these factors along with their own custom factors. Bad credit does not necessarily disqualify a homeowner under Obama's loan modification proposal, fortunately. Most homeowners are unable to keep up perfect credit with the economy in the shape it is in, and the overall plan takes that into consideration. However, individual lenders do have different policies on credit.

Obama's loan modification proposal has been much more successful than the FHA loan program that was instated last year, which only ended up helping under one thousand homeowners. The Home Affordable Modification Program is estimated by experts to aid four to five million homeowners -- welcome news to families across the country.

For additional information on loan modifications, visit Home Loan Modifications.