The US economy has yet to recover from the impact of the 2008 housing crisis and near financial meltdown that has left millions of people still unemployed. While the employment rate has been struggling to rise, the middle class is getting even more squeezed by the rising cost of gasoline that has impacted across the country.
Consider that in 2010 there were 1.6 million filing for bankruptcy by the middle class of America, this large number was due mostly to the inability to make payments on home mortgages and education-related hardships of a financial nature. As millions of American still struggle to make their mortgage payments, one option that has emerged is loan modifications.
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Loan Modifications & Refinancing
Families can go to their lenders to make loan modifications or find other lenders who may offer them refinancing to get their mortgages more in line with the monthly payments that they can make. Refinancing is essentially re-starting the loan on the property that includes what you have already paid and the current value of the home itself. However, refinancing is not an option for homes that are "underwater", a term used to describe when the home is worth less than what is owed.
In this situation, loan modifications may be the answer. The key is to go to the lender before missing any payments and explaining the situation citing the source of the financial distress. Quite often, lenders are open to loan modifications before payments are missed and can be quite agreeable to modifications that may lower the monthly rate, but still keep the total amount due intact. Such modifications are beneficial to both the borrower and the lender.
But what if loan modifications are not enough? There are existing programs that can help families find alternative solutions to paying off their mortgages.
Home Affordable Modification Program
This government sponsored program most commonly known by its acronym of HAMP has helped millions of Americans refinance their homes so that they could better make the payments. The current HAMP program is due to end in December, 2013. Aimed at middle class families, HAMP can help lower mortgage monthly payments to 31 percent of a family's monthly gross income. However, there are some qualifications in order to apply to this program.
You must owe up to $729,750 on the property in question and you must have a specific financial hardship. If you qualify, you can submit a document known as the Request for Mortgage Assistance Form, this is an IRS Form 4506T-EX or 4506-T along with verification of your Income form to your mortgage provider in order to get the assistance needed.
Other Solutions
You can discuss with your lender other solutions such as forbearance which is often used in temporary situations where you skip two or three payments, then make it up on the back end of the loan. You can also investigate other government programs that may allow assistance to your current mortgage situation.
In any case, it is important to act quickly once you realize that paying your mortgage will become difficult. By acting sooner rather than later, you open yourself up to more opportunities to resolve the issue in your favor.
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