Over the last several years foreclosures have been rising sharply. This has led to numerous private and government sponsored programs to stop foreclosure, mortgage modification. Simply put, mortgage modification is when you are keeping your original loan, only modifying the payment terms of the mortgage. This has become increasingly popular among lenders and governments who are struggling with the crippling effects of a credit crunch, a severe recession and high unemployment. By helping homeowners stay in their homes through mortgage modification, means that the effects of having large amounts of unsold homes decreases. This prevents the economy from spiraling out of control because the different financial institutions took steps to work with borrowers. Yet, the biggest reason that these programs are so popular is because the homeowner can keep their homes.
What happens with any kind of mortgage loan modification is that the financial institution will look at what the borrower can afford as far as the mortgage payment is concerned. Meaning, that they will determine what the current annual income of the borrower is in relation to their current mortgage payment. If the borrower is above 30 to 38% of spending their monthly income on a mortgage payment, then the financial institution will lower the payment to reflect this range. Historically, this is where borrowers can afford to maintain their mortgage payments at all times without a problem. This allows homeowners to keep their homes and financial institutions do not have another loan that is in default, a win - win for both parties.
Clearly, the most effective way to stop foreclosure is to have a mortgage loan modification completed. This will allow those homeowners who are facing the threat of foreclosure to stay in their homes and lower their monthly payments to an affordable level.
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