Mortgage recipients of an FHA loan have loan modification options available. The Housing and Economic Recovery Act, passed in 2008, have given FHA lender permission and funding to provide loan modifications for those homeowners who are on their way to foreclosure, but thought they were not eligible for a loan modification.
What a FHA loan modification does is make the mortgage go up to thirty years to pay off with a lower, fixed interest rate for millions of homeowners to keep and stay in their homes. There are a few things to consider being eligible for the FHA loan modification under the Streamlined Modification Program, and they are:
-The homeowner needs to be at least three months or more behind on their mortgage payments.
-The homeowner cannot currently be in bankruptcy.
-The homeowner needs to be currently living in the residence the FHA loan modification would cover.
Also, the current property value cannot be less than 90% of the initial value and the mortgage needs to have been taken out prior to January 1, 2008.
Some of the things that will happen with an FHA loan modification are: extending the loan for an appropriate amount of time along with a new interest rate, the interest rate could be reduced to a minimum of 3% (if appropriate), and the payments can balloon when the loan is paid off, matures or even goes through refinancing at a later date.
Loan modifications is the way many homeowners are going who are about to foreclose, regardless of where their mortgage is from FHA or another lender. FHA loan recipients are finding it difficult to get loan modifications. Steps are being taken to give homeowner who has a mortgage an opportunity to receive loan modification assistance.
Under the Housing and Economic Recovery Act the FHA loan modification standards are quite strict, something the current Administration is trying to change so that all mortgages/loans meet the same standards under the Home Affordable Modification Program. As said earlier, the value of the property being lived on cannot be lower than 90% of the initial purchase value. Many of the properties have fallen below 50% of the purchase value, a big difference from 90%.
Since the Housing and Economic Recovery Act has started in October to try and help those with FHA loans to receive a home loan modification, it is only helping a handful of mortgage holders around the country. The housing market will not get better if the loan modification program doesn’t work with those who have FHA loans as well.
Be prepared if you have an FHA home loan and the property you are buying has lost value quickly like everyone else, then hang on. It is going to be quite a ride for you to be able to recover.
