Loan modification has been created by President Obama’s administration as a way to remedy this situation; if used as it is intended to be, this well-organized plan could play a significant role in the recovery of the economy.

President Obama’s Home Mortgage Plan makes it possible for everyone interested to obtain a 30 year mortgage with a fixed interest rate of 4.5%. Current homeowners can obtain refinancing with a low interest rate of the same 4.5% as well.

Contrary to a refinance, a loan modification is not an additional loan. Instead, it is a variance in the terms of a loan you already have acquired. Lenders are enticed to join in the loan modification process with government-provided incentives. These are the incentives provided:

1. The government pays part of the cost for loan modification for the lender to do the modification, thereby lowering the borrower’s cost from 38% of their gross income to 31%.

2. For as many as 5 years, the borrower will get $1,000 a year for the balance that is left on the loan.

3. The lender will get as much as $1,500 in return for a qualifying loan modification.

4. The sum of the whole government subsidy for the program could be as much as $10,500 per home.

The following are some advantages that come with the Obama Loan Modification Plan to the Economy:

1. People will save additional money by paying lower interest rates after qualifying for a loan modification plan.

2. Borrowers are lured into choosing the program because it offers them cash incentives.

3. Additionally, the program guarantees $1000 for the original loan modification combined with another $1000 for three years. However, you have to pay your dues in a timely manner without defaulting in order for this to be the case.

4. Also, the program plans to lower the interest rate and raise the term of the loan, if the desired percentage of gross monthly income isn’t met.

You will have to meet certain requirements in order to qualify for this modified loan modification proposal. One important requirement is that you have to be the primary resident of your property, and the loan should not have been obtained before January 1, 2009.

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