If you don't qualify for refinancing, but are eligible for loan modification under the Obama Mortgage, there are several things to be aware of once the screening process ends and you have been approved for loan modification.
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The Obama Mortgage: What Happens When I am Approved for Loan Modification?
If you need homeowner relief through the Home Affordable program, also known as the Obama Mortgage, you're subject to a screening process to determine your eligibility for either refinancing or loan modification. Whether you hold a conventional mortgage or a Fannie Mae or Freddie Mac home loan, you will be asked to qualify based on the amount of your unpaid principal balance, your current assets and any financial hardships.

If you don't qualify for refinancing, but are eligible for loan modification under the Obama Mortgage, there are several things to be aware of once the screening process ends and you have been approved for loan modification.

After your initial eligibility has been determined, you need to learn how much of an interest rate reduction you need to get your Fannie/Freddie mortgage or conventional loan payments within 31% of your gross income per month. If an interest rate reduction alone is not enough to lower the payments, your lender may opt to extend your Fannie/Freddie home loan or conventional mortgage to 40 years or defer payment on a portion of your mortgage. This is what the lending industry calls a "principal forbearance." In some cases the lender may forgive a portion of your mortgage.

There is also something called a "value test" which is designed to show whether homeowner relief is "less costly for the investor than not modifying the loan" according to the Home Affordable official website. This simply means that if you have a lot of equity in your home or if your income is too low in comparison to the value of the home, you may not pass the "value test" to be finally approved for the loan modification.

For homeowners who do qualify for loan modification, there is a three-month trial period. Your home loan will be modified for 90 days at a new interest rate and payment level. To be approved for what the government calls a "permanent" loan modification agreement you must make all payments on time during the trial period.

It's very important to understand your responsibilities when applying for loan modification under the Obama mortgage homeowner relief program. If you don't pay on time during the trial period, you will be denied a permanent loan modification plan. You are also required to sign a statement indicating that all information you provide to qualify-including financial hardship circumstances such as job loss, illness, or other situations-are true. Misrepresenting your finances or employment situation has serious consequences. It pays to be 100% truthful when filling out the paperwork for this homeowner relief program.




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