President Obama’s Home Affordable Plan:  HAMP (Home Affordable Modification Program) is a $75 billion initiative intended to help people afford their mortgages and stay in their homes.  One program it funds is a home loan modification program.   Lenders are encouraged to assist borrowers who are having trouble keeping up with their monthly mortgage payments.  These homeowners are facing foreclosure if no solution is found.

The banks are rewarded with $1000 for each home loan modification that they complete, so they ARE willing to help.  President Obama this had in mind when he came up with this plan. With government resources being provided, approved banks can modify a loan so monthly payments are more affordable.  This is done by extending the loan terms, lowering the rate of interest, removing late fees, and in some cases reducing the amount of the actual principal.  The lender can do any or eve all of these to insure qualified homeowners have an affordable house payment.

So how does the plan decide what defines an affordable house payment?  Each homeowner’s monthly gross income is totaled before any items (other expenses) are taken out. According to the HAMP program, an ideal payment is 31% of this gross monthly income or less.  To qualify for a HAMP funded home loan modification you must have a mortgage payment that is 31% of the gross monthly income or more.  When figuring the mortgage payment, the property insurance, taxes on the property and any homeowner association dues you pay can be included in this figure.

What you sadly can’t figure into account are any other payments you have.  Auto payments and insurance, costs of living, and credit card debt for example are totally disregarded by the equation.  It doesn’t take them into account and that is its shortcoming.  This plan is flawed.

Learn more about Loan Modification at Legal Loan Bailout