One of the most commonly cited ways to make loan modification programs more effective is to require banks to write down the principal on loans. This reduces the amount owed by the borrower, which encourages borrowers to stay put and make payments even if they were very deep underwater before. It also reduces banks' profits, so our Riverside loan modification attorneys are not surprised that it hasn't caught on as a voluntary measure. Nevertheless, USA Today reported March 29, the Obama administration has announced major changes to its Home Affordable Modification Program, designed to incentivize lenders to write down principal.
The bulk of the new provisions focus on encouraging principal write-downs, though these are not mandatory. All lenders and loan servicers will now be required to consider writing down principal when they consider how to modify the loan. Those lenders that do reduce principal for first or second mortgages will get higher cash incentives. As an alternative to loan modifications, banks may refinance underwater first and second mortgages through the Federal Housing Administration. The new loans created under such a program can be worth no more than 115% of the home's value. Finally, the plan responds to the high unemployment rate by requiring lenders to offer a forbearance period of three to six months, during which time the homeowner can be required to pay no more than 31% of monthly income as a mortgage payment.
As Ontario loan modification attorneys, we like the ideas behind these changes to HAMP. HAMP has been heavily criticized for not helping many homeowners, and some of these changes are a direct response to that criticism. But as USA Today's FAQ notes, the program's success continues to depend on serious participation from lenders and loan servicers. That's bad, because their failure to participate meaningfully is one of the key reasons for HAMP's ineffectiveness. Banks wanted to be seen as participating, but they didn't want to actually grant many loan modifications because they were, and largely still are, very averse to further risks. To avoid actually performing most loan modifications, banks would give their clients the runaround, repeatedly lose paperwork or otherwise put up frustrating practical barriers.
Howard Law PC has spent all of the California housing crisis helping clients combat this unfair and dishonest behavior by mortgage lenders and loan servicers. We have represented numerous clients who tried to get a loan workout on their own, but found that the lender was understaffed and overwhelmed, unable to process the application in a timely manner. After months of excuses, repeat applications and delays, these clients come to us for help. We are happy to say that lenders seem to respond better when a Fullerton loan modification lawyer is on the job, possibly because they know they can be sued if we can prove they behaved with negligence or actively breached a contract or a law. We do not always file a lawsuit in loan modification cases, but we absolutely will if we find a violation of our clients' rights.
If you're struggling to meet your monthly mortgage payment and you know you need help, you should call Howard Law to learn more about your legal options. For a free consultation, send us a message online or call 1-800-872-5925 today.