Obama’s Federal Loan Modification – What is Financial Hardship?
President Obama has allocated 75 billion dollars to help homeowners who are having difficulty paying their monthly mortgage payments. Obama’s Federal Loan Modification Program provides financial incentives to banks and lenders to rewrite existing mortgages so that homeowners can have lower, more manageable monthly payments. But this program is targeted for those who have experienced financial hardship. What exactly does that entail?
Financial Hardship is a documentable financial situation. It does not mean that you just have a taut budget. It isn’t caused because you bought a fresh car you couldn’t afford or an engagement ring for your gf and the payments are cutting into your expendable income. Financial Hardship is a situation where circumstances you couldn’t control have brought a decrease in income or an increase in expenses that has made it almost unlikely to make your current house payment. This house payment(taxes, insurance and dues included) must now total over 31% of your gross monthly income to be classified as too much to treat.
Financial Hardship can be caused when you lose your higher paying job through no fault of your own and have to take a lower paying job. Maybe your company has given across the board pay reductions, and you now can’t afford your house payment.
Perhaps your spouse died or you got divorced and you can’t make your payment on only one income. Maybe you have had an increase in expenses due to yours or a family member’s medical bills. Many military reservists and guard members have been hit hard financially when they were activated to active duty and had to leave lucrative jobs to serve in Iraq or Afghanistan and only received active duty pay. Their house payment was budgeted with the consideration of their regular paying job . This would certainly be financial hardship.