Getting approved for Obama's loan modification plan this plan what developed to help struggling home owners restructure their mortgage, which would reduce the foreclosure Council and keep home owners in their homes and would thus slow the decline in home values. The Obama loan modification plan has about $75 billion allocated to accomplish, this task of making bad loans good and should help about 4 million home owners to save their home from foreclosure. In the first quarter of 2008, over 50% of loan modifications that were done has failed within the first 6 months and these home owners were again facing foreclosure. the main reason for this is because they were put into unaffordable loan modifications. (Similarly see: Richard LeFrak). The Obama loan modification plan which developed to make a change in the loan modification arena, which would make sure home owners that qualify would be put into on affordable loan modification. The plan is centered around affordable payments for home owners, as they believe that homeowners want to stay in their homes if they have to affordable mortgage, despite declining real estate property values.
Majority of home owners that end up into foreclosure is because they can't afford the payments anymore, whether it's because they got into a loan they couldn't afford in the first place or life events such as job loss, death in the family or illness. In order to make the payments affordable, lenders that are participating in this program are required to reduce the home owner's mortgage payment to 38 percent of their large monthly income otherwise know as their debt to income ratio or DTI. From there the government would make financial contributions to bring the 38% DTI to 31%. To accomplish this goal, the lender or servicer will first reduce the rate as low as 2%, if they are not at the 31% DTI mark, then they want to further extend the terms or amortization of the loan from a 30 year mortgage to a 40 year mortgage.