Government Home Affordable Modification Program Formula For Approval

There is a standard formula that participating lenders use to determine your eligibility under the Obama Home Affordable Modification Plan. The Treasury Department has mandated that this formula be used when reviewing a borrowers request for a loan workout. Learn this basic formula and then you will be able to pre-qualify yourself and have a much better chance of getting your proposal approved.

The federal Home Affordable Modification Plan is designed to provide an affordable and sustainable mortgage payment for homeowners who are either delinquent or at imminent risk of becoming delinquent. The first criteria that must be met is an evidence of a financial hardship situation. This could be due to any number of circumstances, but the generally acceptable ones include:

Reduction in income or loss of income
Change in the households financial circumstances
Lack of sufficient cash reserves to pay mortgage and basic living expenses-excluding retirement accounts
Increase in Expenses
Excessive monthly debt payments and over extension with creditors
Other reasons for hardship

The standard formula used by lenders under the Obama Home Affordable Modification Plan is:

New target payment that equals 31% of the gross monthly income (can use all household income-including roommates)
Arrive at new loan terms to reach that target payment by first reducing interest rate to as low as 2%, extending loan term to 40 years, and deferring or forgiving part of the the principal balance.
Verify that the homeowners financial statement information fits the debt ratio and target payment calculation

So, the way that you can be sure you have a very good chance of approval is to learn the basics of how to figure your target payment and debt ratio, then fine tune your financial statement and make any necessary adjustments to your budget before you send your proposal into your lender. Take the time to learn and prepare, and you will have a very good chance of getting the help you need and deserve.

Source :HOME AFFORDABLE PROGRAM