|The Mortgage Reinstatement Assistance Program offers as much as $20,000|
The Mortgage Reinstatement Assistance Program offers as much as $20,000 for financially strapped homeowners to basically catch-up on their mortgage payments.
The Principal Reduction Program provides a maximum of $100,000, with the mortgage servicer agreeing to a dollar-per-dollar match to cover half of the overall reduction. The program also reduces the monthly mortgage payment, a much-appreciated benefit for struggling homeowners.
But both programs have a major requirement: Homeowners must have adequate income to keep up with the modified mortgage payments. The servicer, the company that collects the mortgage, can lower the principal and/or the interest rate, but homeowners must be able to make the monthly payments going forward, after the changes are in place.
Under the Mortgage Reinstatement Assistance Program, the monthly payment, including insurance and taxes, cannot exceed 38% of the homeowner’s gross monthly income. With the Principal Reduction Program, the monthly mortgage payment cannot be more than 31% of the homeowner’s gross monthly income.
For example, if a homeowner’s gross monthly income is $5,000, she cannot spend more than $1,900 for her mortgage-related obligations under the Mortgage Reinstatement Assistance Program – or $1,550 for the Principal Reduction Program.
Otherwise, it will create another challenge for financially strapped homeowners, who are much more likely to face foreclosure or a short sale down the road.