Government loan modification rules
The biggest new “rule” that the government has come out with lately dealing with loan modifications is the 31 percent rule.
It states that the monthly mortgage payments of a loan that is in the process of being modified cannot exceed 31 percent of the homeowners monthly income.
That means if the homeowner is bringing in 3,000 dollars a month, their monthly mortgage payment cannot exceed 910 dollars theoretically.
That is great news for homeowners on the surface, but is it really beneficial?
In the end I see the new 31 percent rule as a stumbling block for getting loan modifications done in the first place. Banks/lenders will be much more hesitant to give out loan modifications if they can only charge a maximum of 31 percent of the homeowners income each month as a mortgage payment. If less loan modifications get done, there will be more foreclosures, which is a bad thing.