If you hold a mortgage and are considering a mortgage loan modification, you might wonder whether there’s help for you from the federal government. The answer is a definite maybe. There are several government-backed options for mortgage loan modifications, and some are more attractive than others.
For loans that are backed by an FDIC-insured institution like a bank, there is a proposal on the table that may offer help to both banks and homeowners. The FDIC plan, referred to as “Mod-In-A-Box” does not require a lender to write down the mortgage balance, except as a last resort. The plan uses a combination of modifications to help the bank and homeowner arrive at affordable terms that consume only a limited amount of the homeowner’s gross income.
The FDIC plan proposes that the government absorb some of the loss – as much as 50 percent – that a bank may take if it needs to write down a mortgage. The plan is aimed at reducing the number of defaults and keeping homeowners in their homes.
The plan rules also require servicers to modify all of their home loans using these guidelines if they choose to participate in the program. That may be a sticking point, causing some servicers to opt out of the program altogether. On par, however, the FDIC plan, which has the support of the new administration, may represent the government’s best effort to address the question of “negative equity” and mortgage defaults in a way that doesn’t require the bank to take the lion’s share of the loss when writing down the balance on a mortgage. It also doesn’t require the homeowner to forfeit his equity in the home when the home is sold.
Right now, the best bet for loan modification is to work with actual attorney represented loan modification Company that can help borrowers through the murky and sometimes frustrating process of getting a loan modification that meets the borrower’s needs.
