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- The mortgage must have been secured on or before January 1, 2009.
- The primary mortgage must be less than $729,500.
- You must live in the property.
- Your income must be completely documented, through pay stubs and tax returns.
- If the debt on the mortgage is more than 55 percent of your income, you must enter debt counseling.
- You must sign a financial hardship statement.
Contrary to popular belief, you do not have to be late on your payments to qualify for mortgage modification through this program. In this program, your payments are reduced so they are no more than 31 percent of your income, and the interest rate is dropped, sometimes to as low as 2 percent.
Depending on the terms, though, you could face a balloon payment at the end of the mortgage term when you refinance or sell the home. For example, if during the modification the lender reduced your payments by $30,000, this amount could be due all at once if the home is sold or refinanced. While it fixes the current situation, it could create a hardship at a later point in time. Making the monthly payments on time results in a principle reduction of up to $5,000, but a missing payment cancels the deal. The program is in effect until 2012, but can only be used one time.
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