Obama’s Home Affordable Plan - Refinance Or Modification?
Heather Herman asked:
You have heard a lot of discussion about Obama’s Home Affordable Plan, but you are not quite clear on the whole thing. What is the difference between a refinance and a modification?
President Obama introduced his program to help struggling homeowners in early 2009. The economy was swiftly headed downward when he came into office. Therefore, this became one of his first initiatives. He wanted to stop the rising level of foreclosures across the United States.
He did this through two different measures: refinance and modification programs within his Home Affordable Plan. After a year of operation, the refinance program had helped 4 million people save over $7 billion. Over a million people received loan modifications, and the average amount saved on monthly payments is $500.00.
Refinance is an option only available to those who are current in their mortgage. You cannot have been more than 30 days late with a payment in the last year. With a refinance, you are basically refinancing into a better loan. The reason for this government program is to help those who no longer have enough equity in their home due to dropping housing prices. This program allows the homeowner to refinance without the traditionally required 20% equity in the home. A homeowner can owe up to 125% of the value of the home.
Loan modification is for homeowners who are not current in their loan. You can be facing foreclosure and still get a loan modification. Actually, you must be either in default already or in imminent danger of being so very soon to qualify.
A loan modification through Obama’s Home Affordable Plan takes an existing loan and reworks the terms to achieve a lower monthly mortgage payment. Through this program, the late fees and penalties are forgiven, and this allows the homeowner to get a fresh start. Usually any money owed on back taxes or anything else can be worked into the life of the loan.
Sherry
You have heard a lot of discussion about Obama’s Home Affordable Plan, but you are not quite clear on the whole thing. What is the difference between a refinance and a modification?
President Obama introduced his program to help struggling homeowners in early 2009. The economy was swiftly headed downward when he came into office. Therefore, this became one of his first initiatives. He wanted to stop the rising level of foreclosures across the United States.
He did this through two different measures: refinance and modification programs within his Home Affordable Plan. After a year of operation, the refinance program had helped 4 million people save over $7 billion. Over a million people received loan modifications, and the average amount saved on monthly payments is $500.00.
Refinance is an option only available to those who are current in their mortgage. You cannot have been more than 30 days late with a payment in the last year. With a refinance, you are basically refinancing into a better loan. The reason for this government program is to help those who no longer have enough equity in their home due to dropping housing prices. This program allows the homeowner to refinance without the traditionally required 20% equity in the home. A homeowner can owe up to 125% of the value of the home.
Loan modification is for homeowners who are not current in their loan. You can be facing foreclosure and still get a loan modification. Actually, you must be either in default already or in imminent danger of being so very soon to qualify.
A loan modification through Obama’s Home Affordable Plan takes an existing loan and reworks the terms to achieve a lower monthly mortgage payment. Through this program, the late fees and penalties are forgiven, and this allows the homeowner to get a fresh start. Usually any money owed on back taxes or anything else can be worked into the life of the loan.
Sherry
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