Federal Housing Administration Home Affordable Modification Program that comes under the program ‘Making Home Affordable’ is drafted to reduce the stress due to monthly repayments on home mortgages. Federal Housing Administration is the agency with the aim of governing the mortgages and providing mortgage insurance.
What is FHA loan modification?
If you decide to get a FHA mortgage loan modification, it should be first checked whether you obtained the home mortgage from a Federal Housing Administration lender. The FHA insurance for the purpose of mortgage protection functions like other mortgage insurance program in which the insured person has to pay a premium to the company that insures the property. If the borrower is unable to make payments towards the insurance and the mortgage dues, the stress is eased out by the insurance company subject to specified terms and conditions and depending on the coverage features.
The monthly payments are reduced
By modification, the interest rates are reduced to enable affordable monthly payments. However, the term of the loan is extended which leads to additional payments towards the interest on the mortgage. There might be modification on the penalties or other charges. The Federal Housing Administration contacts the mortgage lender and the loss due to the mortgage modification is taken care of. The applicant should fulfill certain requirements to be eligible for the loan modification. The mortgage should be the one from Federal Housing Administration.
Requirements to get approved for the offer
The applicant should demonstrate the financial struggle to be eligible for the program. The home should be the primary residence. The concerned mortgage should be the first mortgage and the outstanding amount should match the specifications of the FHA. The lender should be a Federal Housing Administration lender and the insurance should be active.
The requirements to get eligible for the FHA loan modification program can be verified through the Department of Housing and Urban Development or from the Bank of America. The limit of loan to meet the eligibility and the rate of interest after modifying the loan can be understood with the help of the mortgage calculators provided by the online portals of the agencies.
The helpdesk of the Bank of America can be approached to apply for the modification. If your application is considered eligible for the program, you will be sent a modification package containing the documents to be submitted after completing. The details regarding the income along with the proof and the residential proof are to be submitted along with the application.
The forms that are to be submitted are:
- Request for Modification and Affidavit form,
- Hardship Affidavit
- Request for Transcript of Tax Return, and
- IRS Form 4506-T
When the application process and approval process are completed, you will be sent a proposed modification mentioning the new interest rates and the terms and conditions. This goes on for three months on a trial basis. If the new rates are suitable and affordable to you and if you complete the trial period successfully, then the new mortgage agreement is signed.
FHA loan modification is the best option to avoid foreclosure or bankruptcy. Besides this program, there are other modification programs which can ease out the stress due to mortgage repayments and suit your requirements and eligibility criteria. However, it is not an easy job to convince the lenders to modify the mortgage. You can get the support of the expert attorney to modify your mortgage. The services of the attorneys will help to make negotiations beneficial to you and the lenders. Effective loan modification programs help to change the present mortgage terms and interest rates to make the loan repayments affordable although the extension of the terms make you pay more towards the loan interest.