Obama Loan Modification - Hope For Homeowners - Part 4 of 10

In this important 4th part to the Obama loan modification guide. The Hope for Homeowners Plan is introduced and the important concept of the Standard Waterfall which could drastically affect your families chances of staying in your home.

Overview: The Standard Waterfall will be followed by servicers to lower monthly payments to the defined 31% Front-End DTI ratio. Lenders/investors will be repaid through the initiative 50% of the cost of reduction from a 38% Front-End DTI level or less (provided that the unmodified ratio as less than 38%). to a 31% Front-End DTI ratio. The Share of Payment Reduction Cost is able to last 5 years.

Hope for Homeowners: It is mandatory that servicers consider a debtor, when possible, for refinancing into a Hope for Homeowners Plan. Servicers will be given incentive payments for Hope for Homeowners refinances.

In eligible debtors would be delayed from receiving an offer of modification by the underwriting process of the Hope for Homeowners refinance, servicers shall use the Standard Waterfall to start the Domestic Economical Modification and use the Trial Period to complete the Hope for Homeowners refinance.

Eligible debtors should not be delayed in receiving an offer of modification and beginning of the Trial Period by consideration for a Hope For Homeowners refinance.

Procedure of the Standard Waterfall: 1a- Gross Monthly Income as specified.

1b- Validation of entire first-lien debt as well as monthly installments (PITIA). Any of the debtor's unverified income is able to be sued to make a provisional offer of modification while still in the trial modification period. Modification terms as well as provisional information shall be verified in a prompt fashion.

2- Capitalization of arrears. Accrued interest, insurance premiums, and delinquent real estate taxes, changes of delinquency paid to third parties and not kept by the servicer, all mandatory escrow advances either paid already or due by the servicer (and will be paid during the Trial period) may be capitalized by the servicer. However, the servicer may not capitalize late fees.

3- A 31% Front-end DTI will be targeted. To achieve this, the lender/investor will follow steps 4, 5, and 6.

4- The interest rate shall be reduced for the purpose of achieving the target Front-End DTI (subject to a 2% floor). The note rate shall be lowered in increments of 0.125% for the purpose of lowering the monthly payment as close as possible to-without going below-the Front-End DTI target of 31%. If the interest rate that results is at the Interest Rate Cap or above, that rate will be the new note rate for the rest of the loan term. If it is below, the new interest rate will stay that way for 5 years, and then will go up in increments of 1% every year or a lesser amount as needed to reach the Interest Rate Cap before becoming fixed for the rest of the loan term.

5- In the event that the Front-End DTI target isn't achieved, the term of the loan shall be extended up to 40 years. If this is not allowed, amortization shall be extended. The term of 40 years begins after the successful completion of the Trial Period and at the beginning of the modification. The servicer shall only extend to a necessary term to achieve the Target Front-End DTI.

6- In the event that the Front-End DTI isn't reached the principal shall be forebeared upon. If there is an amount of principal forbearance, a balloon payment of said amount is due either on the date of maturity, upon the sale of the property, or when the interest bearing a balance is paid. In the event that the modification fails to pass the NPV Test but the servicer decides upon loan modification, the modified balance must be higher than the current property value.

Option of Decrease of Principal: It is not required to decrease principle under the Domestic Economical Modification Plan, but servicers may forgive principle for the purpose of achieving the target Front-end DTI.

This option can be used either alone or before the Standard waterfall procedure. If used, steps in the Waterfall may not be omitted. If principal is forgiven and the rate is not lowered, the rate will be treated as a modified rate and frozen.

Obama Loan Modification - Details of Approvals, Fees and Charges - Part 5 of 10

Do Your Qualify and How to Apply:

To see if you qualify and learn how to apply for Hope For Homeowners you can visit:

http://www.obama-loanmodification.com

By Frank Stevenson

Which provides you with valuable resources including:
- Top 10 most frequently asked questions about the program
- Up to date guidelines on if you qualify
- Insider tips
- Free sample hardship letter

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