There are many blog posts and news reports out there describing the plan, usually riddled with technical terms and formulas that are hard to follow. In reality the rules of the Obama Loan Modification are fairly simple. You can qualify if:

• Your total monthly housing costs (mortgage, taxes, insurance, Homeowners Association fees etc…) are greater than 31% of your average gross monthly income.

Example of calculation:

Gross Monthly Income: $2000

Combined Housing Costs: $800

Your Percentage: 800/2000*100 = 40%

If your housing costs are over 38% of your monthly income, the mortgage company is partially compensated by the government to reduce that ratio to at least 38% by whatever means available. Such means include increase of the loan term, decrease of the interest rate as well as others. The important thing to remember here is that the lender participation is voluntary.

• You have not originated your loan after January 1, 2009 – Simple enough: they want to make sure you didn’t close your loan after the January 1st deadline. Any date before that is acceptable.

• The property has no more than 4 units. 5-unit or larger properties are excluded from the Obama Loan Modification plan

• You must occupy the property. Rental and investment properties are excluded to ensure the plan helps those who need it most.

• You must be experiencing financial hardship. What this means is that you have to be able to explain the reason you can no longer afford you monthly payments. These reason can range from dramatic increase in monthly expenses to loss or reduction of income.

• Your current loan balance must be under $729,750 as of the 1st day of 2009

The Obama Loan modification plan at the very least has given guidance to an industry that truly needs it. At its best — millions of homeowners will once again be able to afford their houses and our economy will start to bounce back over time with a new confidence in the housing market and our nation.

Many of homeowners have questions regarding the President  Barack Obama’s Housing Plan.  A lot of Americans are in various stages of foreclosure and the help can not come soon enough.   So who is eligible?

The program is expected to help those who are in danger of not making their monthly payments.  The applicants do not have to be behind, but may be asked to demonstrate that they may be short on making their monthly payments.  The program’s eligibility is determined by whether the monthly mortgage payment is above 31% of applicant’s gross income.  Jumbo loans (the loans over $417,000) are not eligible and neither are second mortgages.

The lenders and loan servicers are encouraged to participate in the program by receiving subsidies and various incentives from the government but are not otherwise required to participate.  Servicers receive $1000 per loan modification and will continue receiving $1000 each year for three years if the borrower continues being current on the loan.