Recently, there has been more than a little bit of talk about the new loan modification program and what the ins and outs of it are going to be. Everyone has been waiting to hear exactly what the Department of Treasure would say on the subject and exactly how enrolling in a loan modification would beneifit not only the homeowner but also the lenders or mortgage servicers. This blog entry will go over some of the biggest benefits of being in a loan modification and why getting involved as soon as possible is to your benefit.

As of March 4, 2009 the Department of Treasury has announced new and updated information regarding how a loan modification works and how one can qualify for a loan modification program.

Following you will find information that will be useful to anyone that is interested in using a loan modification program to prevent foreclosure or to make their house payments more affordable.

Monthly Payment Reduction

The Department of Treasury will partner with qualified and acceptable financial and lending institutions in an effort to reduce a homeowners monthly housing payments. In order for this to work, the responsible lender will have to first take the steps to reduce the Debt To Income Ratio to a percentage not to be larger than 38%. This ration can be as low as 31% in which cases the treasure will match dollar for dollar with the lender or investor. Basically, this means that your mortgage payment will be lowered in accordance to the amount of money you make and your outstanding or out-going monthly expenses. If you enroll in a loan modification program, you should be prepared to discuss and prove exactly how much money you make as well as all of your “credit based” expenses. These include car loans, credit card bills, personal loans, term loans, and any other expenditure that is “credit based”. The current loan modification program guidelines definitely weigh heavily in favor of the consumer or home owner.

Loan Modification Program Incentives

Both the servicer or lender and consumer are eligible to receive “incentives” for their participation in a loan modification program. Basically, the Department of Treasury is willing to reward both the banks and homeowners for holding up to their end of the agreement when a loan modification program is in effect. The Lender or investor is eligible to receive up to $1,000 per year per modification as long as the consumer remains enrolled and current. The homeowner is eligible to receive up to $1,000 per year which is paid directly to the principle of their home loan as long as they abide by the terms and conditions of the loan modification program that they are enrolled in.

The two benefits listed above are not even a fraction of the great things that are possible when you enroll in and participate in a loan modification program. Lets face it, for years not only the government, but the banks and homeowners saw this day coming. Now that it is here, there is no shame in enrolling in a loan modification program, especially if you are at risk of losing your home.

In future installments on this blog, we will talk about the best ways to get started with a loan modification program and what kind of information you should have at your fingertips to get the ball rolling. What I can tell you right now is that the time and conditions are right for any responsible home owner to get into a loan modification program if they feel that they are currently or could in the future be at risk of losing their home. Being responsible means knowing when you can no longer handle the situation on your own and asking for help. Presently, loan modifications are being offered because some banks did not operate in “good faith” and wrote mortgages in a way and with terms that bordered on criminal. So, my advice would be to take advantage of a loan modification program while they are stil readily available and generally accepted by the public at large.