Obama Loan Modification - Modification Plan Guidelines - Part 3 of 10

The third part of the comprehensive guide to Obama's Loan Modification Plan outlines the exact conditions of modification and the plan elements that are described in the guidelines. Discover the lowest you can get your interest rate reduced to.

Interest Rate Floor: All modified loans have a 2% Interest Rate Floor.

Interest Rate Cap: The modified rate of interest is required to be fixed for 5 years. After the 5 years, the interest rate will slowly be raised by 1% (100 basis points) a year or less as need be until the Interest Rate Cap is achieved.

The modified loan's Interest Rate Cap is defined as the lesser of either (i) the fully-amortizing and indexed original contractual rate or (ii) the Freddie Mac Primary Mortgage Survey grade for mortgage loans conforming to a 3-year fixed rate, rounded to the nearest 0.125%, as of the date of preparation of the modification document.

If the modified rate exceeds said Freddie Mac Primary Mortgage rate, this rate will be fixed for the remaining term.

Forbearance of Principal: The Forbearance amount will not accrue interest.

In the event that the option of principal forbearance is selected, collection of the deferred part of the Capitalized Balance will be forebeared upon until either (i) the modified loan matures, (ii) the property is sold, or (iii) the loan is paid off or refinanced.

Loans that are Re-defaulting: When the debtor achieves 90-day delinquency status as per MBA delinquency calculation, the loan will be considered as re-defaulted and be ejected from the plan. When this happens, all payments to the lender/investor, servicer, and debtor will cease. Before being released to foreclosure, re-defaulting loans will be given a chance to be in another loss mitigation Plan.

Cost Share of Monthly Payment Reduction: Treasury will join with other financial organizations for the purpose of reducing homeowners' monthly mortgage payments. The lender must first reduce payments on mortgages to no more than a 38% Front-End Debt-to- Income (DTI) ratio. Treasury will rival even more reductions in the monthly payments dollar-for-dollar with the lender/investor, down to a 31% Front- End DTI ratio for the debtor.

Servicer Incentive Payments and Pay for Success Fees: Servicers shall be given a $1,000 up-front Servicer Incentive Payment per approved change that meets the guidelines set forth under this initiative and will also be paid for success payment up to $1,000, provided that the debtor remains in the Plan.

Analogous incentives will receive payment for Hope for Homeowner refinance

Debtor Pay-for- Performance Success Payments: Debtors are qualified for a Pay-for Performance Success Payment that will immediately go towards decreasing the principal difference remaining on the mortgage loan provided that the debtor is up-to-date on his/her monthly payments. Debtors are able to be paid up to $1,000 Pay-for-Performance Success Payments per year for five years.

Current Debtor One-Time Bonus Incentive: The Plan will give lenders/investors a one-time bonus incentive payment of $1,500 to lenders/investors and $500 to servicers for modifications that are made while the debtor is still up-to-date on their mortgage payments. It will be mandatory for the servicer to keep documents and records that prove that the Plan was agreed to while the debtor was still up-to-date. Any express pooling and servicing contractual obligations must be upheld with for modifying current loans.

Plan Payment Conditions: The lender/investor, servicer, or debtor will not be paid until the servicer has agreed with the agreements of the Plan with Treasury's financial agent. Servicers must agree with the agreements of the Plan with Treasury's financial agent by December 31, 2009.

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

Do Your Qualify and How to Apply:

To see if you qualify and learn how to apply for Obama Loan Modification Program you can visit:

http://www.obama-loanmodification.com

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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