On March 4th, 2009 the White House release more details about President Obamas Loan modification plan. It’s no secret that the housing market is in turmoil and is playing a large part in the weakening U.S economy. It is also no big secret that one of the main platforms that Obama ran on was coming up with a loan modification plan that would help struggling homeowners to stay in their home. The details from the White House was long and contained a lot of legal info. However, I pulled 3 main things out of the information which most people will want to know. It appears that a loan modification plan will be able to help millions of people if they are smart enough to take advantage of a loan modification. Below you will find some of the main areas of interest.

1. It’s about cost not value – One of the biggest reasons for coming up with a loan modification plan at all is because the Obama administration believes that if they can reduce the monthly payment to an amount that the homeowner can afford that they will stay in the home even as the home value falls. In my opinion, this is sound thinking. I can’t see many people walking away from their home because the value is plummeting. I can’t see anyone walking away from their home voluntarily for any reason. As long as the loan modification plan reduces the monthly payment to a point where people can afford it and still live comfortably, they will wait until the value of the home rises before trying to unload it. There are some people that believe that people will abandon their homes – loan modification plan or not simply because their home is no longer worth what it was when they bought it. My question is, abandon their home and go where? To rent an apartment? Homeowners are smart enough to know that the real estate market goes up and down. They are also smart enough to know that as long as they can afford to pay for the place that they call home then they will make the payment. Nobody wants to be homeless or have a forclosure on their credit report. The loan modification plan will likely help millions of people remain in their homes.

2. Debt To Income Ration – The way that the loan modification plan is going to work is actually very sound. The loans that are modified will be done so in a way that the persons Gross salary as well as current bills will be taken into consideration. The loan modification plan calls for the lender themselves to modify the mortgage payment to be no more than 38% of someones debt to income ratio. The Treasury will then step in and help the lender further reduce that payment to be no more than 31% of the homeowners debt to income ratio. You can figure your own ration by simply taking your Gross salary. Once you have done that multiply it by 31% and then you have roughly what your mortgage payment would be. It is unclear at this time whether or not they will take your other credit related bills into consideration when figuring out what your actual payment will be under the loan modification plan.

3. You can’t lose – Let’s face it, if you are looking for information on the loan modification plan it is more than likely because you are afraid you are going to lose your home. For some people, a loan modification plan is “below them”, but what they don’t understand is that everyone is “hurting” right now. People that have been able to maintain a credit score of 800+ for their entire lives are taking advantage of the loan modification plan because it will help them maintain their credit rating. People are being laid off left and right, creditors are reducing our credit lines on things like credit cards and even open lines of credit, and our financial future is uncertain. Getting more information on the loan modification plan makes you responsible not some sort of welfare case. Do what is smart and take advantage of the loan modification program while it is still available.

As you can see, the loan modification plan is really a no-brainer for those that are either currently in financial trouble with their mortgage or for people that can see the trouble coming. The lenders themselves actually welcome the idea of loan modification if you qualify because it helps keep their books clean, more importantly it allows them to keep people in their homes rather than foreclosing. Believe it or not, the bank would much rather have you in the home and paying a payment that is affordable than taking the home from you and letting it sit vacant.

We will update this page with more information on the loan modification plan as it becomes available.