Many homeowners are able to solve their financial problems by accessing President's Making Home Affordable (MAH) plan. The MHA plan officially became law on March 4, 2009 and now millions of homeowners across America who were facing foreclosure have a way to save their homes. The plan also creates a lot of questions about the difference between loan modification and FHA refinancing.
You should know that a MHA plan is only accessible for homeowners who have mortgages backed by Freddie Mac or Frannie Mae. There are other plans that work with other types of loans, but they are not as easy to access, apply for or get as the MHA home loan modification plan. The government is trying to find a way to have the MHA cover more loans.
If your hard times are due to the economic recession in the United States, you are in good company. A lot of people are having trouble paying their mortgages and there are two things they can do in reaction to this. They can modify their loan using the MHA plan or they can check out FHA refinancing. What one you choose is dependant on who insures your mortgage loan. If you do not know who this is, call your lender and ask.
If you have a FHA loan, you can access the HOPE for Homeowners program. This program allow homeowners who do not qualify for more traditional methods of refinancing, a way to get it. In the past, homeowners have had to have 20% equity to qualify for refinancing, but recently, in a falling market, people have actually lost equity. This is not the fault of the homeowner and HOPE for Homeowners acknowledges this. In order to obtain this type of refinancing, homeowners must participate in equity sharing if they want to avoid foreclosure.
Equity is how much of your mortgage loan you have paid off. HOPE for Homeowners requires those who refinance under this plan to split their equity with them when the house is sold. If you sell your house within the first twelve months of refinancing the FHA gets all of the equity. If you sell it after five years they get half. This plan can be accessed until September 20, 2011 through the FHA.
If Frannie Mae or Freddie Mac insures your loan, the MHA will handle your loan modification. If you are paying 31% or more of your gross monthly income on your mortgage, you are able to apply for a loan modification to get your mortgage payments reduced to something you can afford. There is a set procedure for a loan modification. They begin by reducing interest rates until they hit 2%. When a lender approves a loan modification, they get an incentive payment from the government as a reward. Borrowers are also given an incentive if they pay their modified payments on time. They also get to keep their house.
Both a loan modification and FHA financing can help you avoid foreclosure and allow you to stay in your house. This article has outlined how to decide between the two options.
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