Jennifer, a single mother with two small children, has worked as a paralegal at the same law firm for the past 10 years. Recently, the firm downsized. Jennifer’s hours were cut and she has less money coming in each month. Jennifer is struggling to keep up with her bills and missed her last mortgage payment.
Does Jennifer qualify for a loan modification under the new plan? She may because she meets the following requirements:
Like Jennifer, you may be struggling to pay your mortgage, perhaps because your income has been reduced or you have another financial hardship. If you are struggling to pay your mortgage, here are answers to some of the questions you may be asking about the plan.
Do I need to be behind on my mortgage payments to be eligible for a loan modification?
No. If you are struggling to stay current on your mortgage payments you may be eligible if your income is not sufficient to make your payments.
How do I know if I qualify for a payment reduction under the plan?
In general, you may qualify for a mortgage modification if: 1) You occupy your house as your primary residence; 2) Your monthly mortgage payment is greater than 31 percent of your monthly gross (before tax) income; 3) Your loan amount does not exceed $729,750, the current Fannie Mae and Freddie Mac loan limits, and 4) You are unable to afford your current payment. Final eligibility will be determined by your mortgage lender.
The mortgage I’d like to modify is on a second home or rental property. Is this mortgage eligible for modification?
No. Only the mortgage on the property that you live in is eligible.
I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2, 3, and 4 unit properties are eligible as long as you live in one unit as your primary residence.
I have two mortgages. Will the plan reduce the payments on both?
No. Only the first mortgage is eligible for a modification.
I owe more than my house is worth. Will the plan reduce what I owe?
The goal of the plan is to help homeowners avoid foreclosure by modifying their loans to make payments more affordable. Mortgage lenders are likely to lower payments first by reducing interest rates. However, your lender may also choose to reduce your principal amount.
Is there a financial incentive for homeowners?
Yes. To encourage homeowners who work hard to keep their homes, the plan provides them with a financial incentive to make timely payments on their modified loans. Borrowers who pay on time for five years will have up to $5,000 applied to reduce their principal debt on their first mortgage.
Is there a fee to modify my loan?
There is no fee to modify your loan.
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