The U.S. economy is currently facing a severe economic crunch, due to which loan modification has appeared. Nearly six million homeowners are facing home foreclosures, primarily due to the current recession.

As a matter fact, consumer spending is down across the in all areas of the economic landscape. Experts that have analyzed the root causes of recession are predicting more rough economic times are ahead.

The Rescue Plan:

President Obama has formulated a loan modification stimulus plan to combat the current economic crisis – this well-organized plan has been thoroughly analyzed, and if appropriately applied to the faltering home real estate market, it will generate a significant economic boost.

This plan understands that homeowners are not able to refinance their loans and take advantage of the now historically low interest rates, because the loan-to-value (LTV) ratios are too high.

Most lenders want to see an LTV of 80% or lower before they consider a loan modification plan, that is, homeowners must owe no more than 80% of the current value of their property.

The Obama’s Home Mortgage Plan says that every person should receive access to a 30 years fixed rate mortgage with an interest rate of only 4.5%. In addition, refinancing would be made available to current homeowners at an interest rate of 4.5%.

Unlike a refinance, a loan modification is not a new loan. Instead, it is simply a modification to the terms of the existing loan. To encourage lenders to participate in the loan modification process, the government is offering them several incentives. We should briefly examine of these.

Stated below are some of the benefits of Obama’s Loan Modification Plan For Economic Stimulus:

1. Reduction in the interest rate after qualifying for a loan modification plan will help people to save more money.

2. To try to get borrower to try the plan, it offers cash incentives.

3. The program also assures $1000 for the original loan modification along with $1000 additional for three year. But, this is valid only with the condition that you pay your dues on time without defaulting.

4. If a person does not meat the percentage of total monthly income, the program aims to still minimize the interest charges and increase the loan terms.

However, you will have to fulfill certain criteria to qualify for this new loan modification plan. One pivotal criterion is that you have to be the prime resident and the loan should not date back beyond January 1st 2009.

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