Mortgage Relief Fund: Home Loan Without Refinancing

Up until a few months ago, lenders were not modifying loans for home owners that were on time with their payments. So if you have been considering to miss a few mortgage payments to encourage your lender to modify your loan, you may want to re-consider. Normally lenders would only grant loan modifications to home owners that were three or more months behind and the reason for this is because these delinquencies proved that the home owners were in need of a loan modification.

When shopping for adjustable rate mortgages, consumers should make sure that they have a firm understanding of the loans’ margin, its associated index, the adjustable intervals, and the caps for the adjustments. Consumers should also be aware that the first adjustment may be potentially larger than that of future adjustments. For example: A loan officer quotes a 3/1 LIBOR ARM with a start rate of 4.000% and a 2.25% margin and a initial rate cap of 3% and then annual rate caps of 2% for every year thereafter.

In this scenario the intro rate would be set at 4.000% for the first three years of the loan. On the 37th month, the loan would adjust by adding the loan’s margin (2.250%) to the current index rate (say 1.250%). The result would be the “fully indexed rate” of 3.500%. In this scenario a person would actually see their rate decrease on the initial adjustment. Depending upon the current index rate, the loan may be limited in its first adjustment by the 3% cap limit.

Now what does “risk of imminent default mean? This means that a home owner that has a mortgage relief fund where the rate has recently adjusted and the payments are no longer affordable or a significantly loss of income or any other type of hardship, would make the home owner qualify under the new Obama Plan. Now one important reason not to be delinquent with your mortgage payment, is that is will disqualify you from getting a refinance under the Making Home Affordable Plan, refinancing under this plan could help home owners refinance at current market values so they are no longer upside down with their current mortgage and get a more stable fix rate loan.

Adjustable rate mortgage borrowers should also feel confident in their ability to refinance before their loan’s first adjustment and that the real estate values in their communities are in a stable or appreciating environment. The last thing a homeowner wants is to be upside down on their home loan and stuck in an ARM without the ability to refinance.

Learn more about Obama Mortgage Relief Plan Qualifications.