Making Home Affordable - Obama's New Plan

President Obama is looking out for people who are struggling to make their house mortgage payments. With an average of four to five million homeowners in America, many families are struggling to keep their homes. Obama has put a new plan into place to help these people. Known as Making Home Affordable (MHA), this new legislation should help homeowners make their payments and ultimately, get to keep their homes.

Homeowners who are eligible have until January 1, 2012 to take advantage of the MHA plan. However there is certain criterion that must be met in order to qualify:

1) You must live in the dwelling you are inquiring about.

2) The current loan must be taken out before the 1st of January, 2009.

3) You must owe less than approximately $729.000 in principle on the loan.

4) The current loan must be insured by Freddie Mac or Fannie Mae.

5) Your mortgage payments must be more than 31% of your monthly gross income.

Finding out if you qualify is the first step under the MHA plan. Those who qualify will have lower mortgage payments each month, as the principal, insurance, taxes and interest will all be brought down. The goal is for your payment to be no more than 31% of your gross income. The interest may be reduced and the length of the loan may be increased. However, all of this will help you keep your home and make those monthly payments.

There are benefits to both borrowers and lenders who participate in the MHA program. Borrowers are given incentives for paying on time. Lenders are benefited by receiving incentive payments for accommodating the needy borrowers. It's a plan that helps both sides.

It is not mandatory for lenders to participate in MHA. However, most will because of the profits for them. They have certain rules they must follow to make the program work, however. These steps are required of any financial institution who wants to offer MHA loans.

First, the bank must reduce the interest of the loan in small segments until the monthly mortgage payments are down to at least 38% of the monthly gross income. Secondly, if they cannot get the amount low enough, they are to make the loan longer, up to forty years. Once amount of the monthly payment is down to at least 38% of the monthly gross income, the financial institution can depend on the United States Treasury to lower the payment to the 31% of the monthly gross income.

It's not difficult to get an Obama MHA loan modification. In fact, it's quite simple if you know what to do. The federal government has made the program available to help homeowners keep their homes.