A New Loan Modification Called Principal Reduction Alternative, It is Primarily for Principal Loan Reduction is Coming Soon!
There never seems to be an end to the different types of loan modifications programs that are being rolled out by congress. The latest one rolled out on October 1st of 2010. This program is called the Principal Reduction Alternative which it's primary focus being the mortgage principal reduction, but it is also designed to lower a borrower's mortgage payment at the same time. Even though other loan modifications have touched lightly on principal loan reduction, this one will go a lot further. The new loan modification program came out, and more homeowners now have another opportunity at reducing their mortgage principal balance just by making timely mortgage payments if they are ever put on this program. There are some restrictions though. With this program a homeowner must not be 90 days or more past due with there mortgage payment. In addition to this a borrower can not have been convicted of a crime with in the past 10 year directly related to a mortgage or real estate transaction with any of the following crime:
Tax evasion
Money laundering
Felony larceny, fraud, theft or forgery.
If you have been convicted of any single one of the crimes listed above or been convicted of several of those crimes you are prohibited from getting any relief from this government; which is directly derived form the Obama Administration’s Program from February of 2009, under the Making Home Affordable Program(MHA) and to go a bit further, it is The Dodd-Frank Wall Street Reform and Consumer Protection Act or simply put, the “Dodd-Frank Certification.” This program was constructed to help stabilize our troubled housing market and help out homeowners in financial trouble and it will provide some degree of protection for homeowners.
Starting September 21, 2010 homeowners needing help with this program to lower their mortgage will start to see this new document in the mail from their mortgage company in the future informing them of this program. There is an interim period of September 22, 2010 through December 31, 2010. The document will advise a homeowner needing help that the government required for lenders to conduct a criminal background check on a homeowner in order to review them for this brand new mortgage balance reduction program(PRA). So don’t be surprised if you are seeking government assistance with your mortgage and you are getting this document because it‘s now a requirement. Your background must be checked for prior mortgage/real estate related criminal convictions.
The recent government programs such as: Home Affordable Modification Program(HAMP), the Home Affordable Foreclosure Alternative(HAFA) that are outstanding with a trial period or a review that is already under way is not affected by this program up until December 31, 2010. However, those outstanding or still on the trial period January 1, 2011 will now be affected. You can get more information and the document at HMPadmin.com
This loan modification program will aggressively look at lowering principal mortgage balances that have a Loan To Value(LTV) of at least 115%. For mortgagees to be considered for this program they will have had to have applied for the Home Affordable Modification Program(HAMP), and were denied before being able to qualify for the Principal Reduction Alernative loan modification program. If a homeowner qualifies for a HAMP then he/she would have to take that option, which would keep them from getting into the principal mortgage reduction loan modification program. Also, the property has to be the primary residence of the borrower, and have a unpaid principal balance of no more than $729,000. If a homeowner is beyond 90 day past due ladies and gentlemen, just a make a payment or a few payments, or you might want to go on a mortgage repayment plan to get under 90 days past due then apply for this program. The reason I am mentioning this is because many borrowers are "upside down" on their mortgage loan, and if you are in that situation here is your opportunity to get a mortgage loan modification and with an added bonus of a lower principal balance. Remember, each year that you are with in 90 days past due and no more past due than that, and you will have your principal mortgage balance reduced, compliments of the government; the program is subsidized. That's like "having you cake and eating it too".
Here is an example of how the principal mortgage reduction program will work, say your home is worth or appraised at $200,000 and you owe $230,000 on the mortgage note, your LTV is 115%. Likewise, if your home is worth or appraised at $300,000 and you owe $450,000 then your LTV is 150%. The program is intended to give homeowner and investors some relief. It will consider both parties when doing a principal reduction. This program is strictly for homeowner that have a LTV of at least 115% or greater, if your LTV is less you will not qualify. It is designed for homes that have suffered the most loss in equity. This program is designed to give a principal reduction to a homeowner over a 3 yr period, however, not all at once. So if you were to become eligible for this program and you have a LTV of 115%, live on the property, have an unpaid principal balance of no more than $729,000, and you were not able to qualify for the HAMP; you would be given a 5% principal reduction the 1st year you are on the program and you made all of your monthly payments on time. You can not ever go 90 days or more past due while you are on this program. If you ever go 90 days or more past due, you would be removed from the program immediately, and never have an opportunity to re-apply for it again. So it is important to stay current on the program if you are able to get on it. The same thing would go if you completed the 1st year successfully and had a reduction in your principal balance for the 1st year; now if you are on your 2nd or 3rd year while on the program and you go 90 days or more past due, you would not get any addition principal reduction from there on, no exceptions! Just remember if you get the opportunity to be on this program, please make sure you follow the rules so you have no regrets.
The mortgage investors will also have to opportunity to recover some of their investment on these loans. Investors will have to the opportunity to recoup $0.10 to $0.26 on the dollar for participating in this program; these types of returns on their investment can be prove to be more lucrative than doing a short sale or a foreclosure in some cases. Once again, the investors will choose to participate in any or all of these loan modification programs that are continuously being created to help homeowners to recover from one of the worst mortgage crisis we are facing since the great depression. To see if your mortgage company is going to participate, talk to your lender or servicer to find out. Countrywide will not participate, you would think they would be the poster child for this type of programs designed to assist their borrowers, but word has it they will not part take in this loan modification program. Each lender operates differently so you never know unless you ask.
Remember, there will be something else coming down the pipe line again. Now the question is this, will the next program benefit. Each program is designed differently, and tends to build on the previous ones. Keep listening and checking back frequently for the latest loan modification programs as they are coming out. This way you can get tips on each of them and stead ahead of the mortgage curve at all times.
