A lot of people are asking this question.
The is an excerpt from an article about the 'real estate rescue plan'. This portion goes into depth about who is eligible.
"Homeowners in default or at risk of default may qualify for loan modifications, which restructure the terms of loans.
Anyone at risk of default, such as those suffering serious hardships, income loss, increases in expenses, payment "shock" (such as when interest rates jump), high mortgage debt compared to income, who are underwater or who show other indications of being at risk of default, may be eligible for modification.
The mortgage must have originated before Jan. 1, 2009, and the unpaid principal can amount to no more than $729,750 for a single family home (more for a home with two-to-four units). Borrowers with other debt, such as car loans and credit cards, exceeding 55% of their incomes, may still qualify for a modification, but they'll be required to accept debt counseling in a HUD-certified program.
If you qualify, your servicer - the company that administers the loan and to whom borrowers make their payments - or lender will reduce your monthly mortgage payments to 31% of your gross income. The reduction would come mostly through interest-rate reductions - though rates can be lowered no more than to 2% - or by extending the length of the loan to 40 years. In some cases, principal reduction also would be an option.
The reduced payment would stay the same for five years and then gradually revert back to the conforming loan rates in place at the time of the modification, increasing by no more than 1% a year.
Borrowers would also receive incentive bonuses, in the form of principal reduction, of up to $1,000 a year for five years for making payments on time.
Servicers who participate are required to modify all eligible mortgages under the program unless they are specifically prohibited from doing so by the contracts they have signed with investors, who are the actual owners of the notes. In those cases, lenders and servicers have to make good-faith efforts to obtain permission from investors to make the modifications.
President Obama estimated 3 to 4 million homeowners could benefit from the new modification procedures. Eligibility for the program will sunset at on Dec. 31, 2012, and borrowers may tap the program only once."
This article was posted courtesy of CNN Money Real Estate Section
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