The Direct Effect:

The homeowners who had mortgaged their houses were directly affected by the recession because many lost their jobs, while there were others who incurred severe financial losses in businesses. These homeowners could not do the monthly payments regularly and so were tagged as people with bad credit. For these homeowners loan modification was one of the last resorts.

The Indirect Effect:

The lenders of the home loans were not sparred by this financial calamity. In case of the debtor failing to pay the monthly installments, the maximum; and worst a lender can and could do is foreclose the property. In fact, many lenders did this but still could not recover the money loaned to the debtor. The only option left with the lender is to modify the loan or mortgage modification. The lenders have liked to neither modify your loan nor take part in the loan modification process.

"During the latest recession, the worst to be hit were the homeowners who had mortgaged their houses. Consequently, even the mortgage lenders had to face the brunt of this financial hurricane. The Obama administration, through its Mortgage Loan Modification Program, has been quick and effective in giving the response to this financial calamity."

Lender's Incentives:

Now that the Obama Administration is promoting the loan modification assistance, the lenders have now shown more interest in mortgage loan modification. The incentives that are linked with home loan modification and available to the lender are as follows.

  • The lenders will get an incentive of $1,000 per borrower for identification of that borrower and assisting them for loan modification and avoiding foreclosure.
  • For 3 successive years of timely payment the lender will get an extra $1,000 per borrower

Lender's Responsibilities:

For becoming the registered lender of this home affordable loan modification workshop the lender besides other formalities has to do the following.

  1. Reduce the rate of interest rate in slabs of 0.125% till the rate of interest reaches 2%
  2. The duration of paying back the loan can be extended to 40 years if the monthly payment is more than 31% of the total gross income.
  3. The lender cannot charge a monthly payment more than 31% of the gross monthly income.