This is a voluntary program, but most lenders are likely to be participating. The Treasury Department will pay banks up to $1500 for each eligible mortgage that is modified under the program. That is a big incentive to get the lenders to offer help to worried homeowners. In addition, borrowers will be paid-for-success under this plan. Eligible homeowners will get $500 upfront and $250 for three years as long as they do not re-default. This bonus payment will be credited towards the loans exceptional balance.

A loan modification on a Second Lien Modification Program under the federal plan could include lowering the interest rate to 1% for five years to get an affordable and sustainable payment. The government may support financially part of the participating banks losses caused by the new loan terms. Another option under this federal loan workout involves paying the bank that holds the second lien up to 12 cents on the dollar to retire the debt. This will be at the banks sole maturity and is not mandatory.

Homeowners who have lost assign of value due to the housing slump may be offered a loan workout that includes forgiving or deferring a large chunk of their second loan balance. Many homeowners who are underwater are basically deciding to give up their home-adding to the mounting foreclosure problems. The idea is to encourage borrowers to keep making payments by helping to reestablish a more reasonable position on their home loan modification. Although not everyone will be given this alternative, it is being offered more frequently. Be sure you contact your second trust deed holder to make inquiries about the possibility of forgiven or delayed principal.

Interested homeowners will be asked to plan a federal loan modification application and provide proof of a financial hardship situation. A purpose will be made based on this information, and qualified homeowners will be eligible for this aggressive program. A successful borrower will be able to submit a complete and perfect application that meets the requirements for approval. Make sure you understand how to get ready your paperwork before contacting your lender. Trying to prepare your own accurate and acceptable financial statement can be frustrating and confusing.