New Modification Assistance for FHA Borrowers
Recently, HUD passed new guidelines allowing FHA borrowers to cut down their monthly payments on their mortgage through a Making Home Affordable loan modification program starting August 15th. Prior to this, homeowners struggling to make payments on their FHA mortgage were not allowed to get a loan modification.
Now, borrowers will be able to lower their principle on their loans by up to 30% in what is being called a partial claim. The goal is to reduce their monthly mortgage expenses to 31% of their income. However, the principal reduction will be combined into a second, no-interest loan that won’t be due until the first loan is completed, or the borrower sells the property. Reducing the principal on the original mortgage in this way will allow homeowners to lower their monthly mortgage payments to an amount they can afford, thereby preventing foreclosures and defaults.
The program is called FHA Home Affordable Modification, brings the borrowers up-to-date on their payments: it includes all past due payments into a new second mortgage with no-interest. In order to qualify, a borrower must already be in default on their mortgage at least one month, but not more than one year. This will hopefully prevent abuse from
- those who are irresponsible and really unable to make payments and
- from those who can make their payments but try to take advantage of the program
Any borrower wishing to utilize the program must be the owner occupant of the single-family residence, have a justifiable hardship and be able to prove that they sufficient financial resources to maintain payments on the new mortgage.
For more information on the FHA-Home Affordable Refinance Program can be found on the HUD website.
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