The Obama loan modification plan has become one of the staples of President Obama’s time in office. The plan is known by many names, but the intent remains the same: to help struggling borrowers avoid foreclosure and stay in their homes or find more affordable housing.
The Obama loan modification plan, officially called the Home Affordable Modification Plan, or HAMP, offers incentives to lenders who modify qualified loans. In most cases, both the lender and borrower benefit from the modification. Not only does the borrower get a lower monthly payment, but the borrower can seek reimbursement from the government if they happen to lose money on the deal.
HAMP has not been without its controversies. For reasons that are still unknown to the general public, lenders participating in the program have failed to modify as many loans as they can, leaving millions of homeowners wondering about the fate of their homes. While it is true that HAMP has increased the number of homes it has saved from foreclosure since 2009, the numbers still seem tiny compared to the number of homes that need attention.
Assuming that a home is approved for a modification, more than just the borrower and lender will benefit. In fact, every tax payer who lives in the same region as the saved home will benefit, whether they notice it or not.
When a home is foreclosed on, the value of the homes surrounding the foreclosure will notice a drop in their overall property value. When the home is saved from foreclosure, the values remain unchanged.
Also, when a family is allowed to stay in their home, the city, county, and/or state will continue to be able to tax the family, bringing in much needed revenue to benefit all of the tax payers of the region.
Even though HAMP is a federally controlled program, borrowers still apply for a government modification through their lender, assuming the lender is a participant in HAMP. Any lender that sells their loans to Fannie Mae or Freddie Mac, which are both under federal control, is automatically required to participate in HAMP. All other lenders are allowed to participate in the program, but participation is not required. Also, the lender will still have final say on whether or not they choose to modify, making negotiation with the lender a necessary aspect of being awarded a modification through the government program. The government does not guarantee modifications, it only provides incentives to lenders that choose to modify.
In order to receive the full benefit of the Obama loan modification plan, borrowers should consider hiring an experienced and local foreclosure attorney to deal with the lenders and the paperwork. The presence of an attorney in the equation does wonders to decrease the amount of time that the lender spends reviewing a request and will help ensure the borrower is treated fairly and within the limits of the law.
Even though an attorney can’t guarantee that a modification will be granted, they can offer expert advice and experienced negotiation skills that can favor the borrower in negotiation and court room settings.