With unemployment a critical issue in the U.S. economy following the sub-prime mortgage crisis and ensuing global financial crisis, many people are finding it more and more difficult to meet loan payments and the country is seeing more defaulting on loans and foreclosures than before. To combat this disturbing trend, the Obama administration has set up a Home Affordable Modification Plan to help people who are struggling to meet mortgage payments every month. This program helps people in financial difficulties who are no longer able to meet the original repayments for the loan by helping them negotiate with lenders for loan modifications.
Loan modifications are changes made to the loan to make it different to the original terms of the loan that were agreed to by the lender and the borrower. Unlike a forbearance agreement, a loan modification is permanent and a long-term solution to long-term financial difficulties in meeting payments in a timely fashion.
Federal mandate states that if a loan modification is agreed to by the lender, they are not allowed to include any administrative charges, late fees or penalties in the modification. Also, the Home Affordable Modification Plan offers incentives in the form of a cash bonus to lenders who reach out to homeowners who are potentially going to fail to stay current on their repayments, despite still being current on payments at the moment.
