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Federal Loan Modification

As you most likely know by now, the bursting of the housing market bubble in 2006/2007 has led to harsh and erratic real estate conditions in which millions of homeowners are struggling to save their homes, and millions have already lost them to foreclosure. Foreclosure rates in most part of America have been, and are, alarming, and in an effort to curb the growing numbers of foreclosures, a federal loan modification plan was initiated in 2009 under the Obama administration.


The objective of Obama’s federal loan modification program is to facilitate the renegotiation of mortgages in such a way that the modified terms and conditions translate into a more affordable arrangement for struggling homeowners. The program was created with the title HAMP, which stands for Home Affordable Modification Program. It was created in March of 2009 with funds from TARP (Troubled Asset Relief Program).


As is stands now, the HAMP program is scheduled to operate until the end of 2013. It has met with a number of criticisms due to a number of flaws in its implementation that continue to undermine its potential positive impact. Success rate figures have been quite far off the mark from what was initially expected and projected. Having said that, a number of homeowners have already benefited from the program, which enables a home loan modification through a number of ways which include:


  • Principal balance reduction – In some cases the principal amount on the mortgage is reduced, resulting in lower monthly payments over the same loan term.
  • Rate decrease – One aspect of a loan modification agreement involves the adjustment of the rate so that the monthly payment obligation is reduced. This option reduces the interest portion of the mortgage. The principal balance is unaffected.
  • Term increase – In this instance, the loan period is extended which in effect lowers the monthly payment, even though the size of the loan remains constant.


The HAMP program is governed by a range of guidelines that determine who is eligible for the program. While a government loan modification application of this nature has the potential to bring about a more affordable financial situation for the struggling homeowner, it is best complemented by effective loan modification software that can enable and support a streamlined and thorough application. A home loan modification should necessitate the sweating of blood in order to obtain. With effective loan modification help at your disposal, it should be a relatively simple process.