Dana Point, CA -- (SBWIRE) -- 06/23/2010 -- The Making Home Affordable Program was started by the Obama Administration to help deal with the home foreclosure crisis brought about by the recession and dropping home values. The central part of the program is the Loan Modification program designed to help struggling home owners. The loan modification program is designed to permanently change the terms of a mortgage loan in order to create a payment that the mortgagor can still afford.

In order for a loan modification to take place several factors will be looked at by your lender. Both the lender and the borrower must mutually agree to the new loan terms. The goal is that the modified agreement will allow the borrower to stay in their house while the bank can avoid having to go through the foreclosure process. Some of the factors a lender will look at include the nature of the hardship causing you to fall behind in your payments, your ability to pay, your equity and amount owed and your future financial outlook.

The modified loan must have a 30 year payment term that re-amortizes the entire loan amount. This was done to streamline the process by utilizing only one loan type and it is also to provide the lowest possible monthly payment.

Lenders still have certain rights to protect themselves during the loan modification process. First of all they may roll into the modified loan any costs they have previously incurred related to collection on your delinquent mortgage. The mortgagee is permitted to perform an interior inspection of the property to determine its condition. Lenders are also permitted to require escrow advances for any items that if not paid would create a lien with a priority higher than the mortgage.

Homeowners also are given certain rights by the loan modification program. Any accrued late fees and charges should be waived when the loan is modified. The new loan interest rate must also be made at the current market rate which will be an advantage to most home owners given the record low interest rates that currently exist.

As with any new programs that come along in this day and age it does not take long for the scammers to get involved. Do not transfer your deed to your property over to anyone who is not working directly with your mortgage company.