Being able to successfully apply for a mortgage loan can never be considered to be the last of any new home owners problems.
After having had a mortgage loan approved it is only natural that you can fail to actually pay it back.
Because of the number of people defaulting on loan repayments the federal government took it upon itself to draft a law that caters for mortgage principal reduction.
More popularly known as a mortgage loan modification procedure it is meant to restructure the original repayment arrangements to suit a borrowers financial difficulties.
The new mortgage modification initiative was created in order to assist people struggling to cope with contractual repayment agreements.
Not everyone qualifies for this particular program and certain requirements need to be met first.
Generally people with federally backed loans or those who took insured loans find it easier to get their modification applications approved.
Because loan modification exposes banks to the possibility of not retrieving their funds the government decided to have an incentives facility that awards banks the freedom to modify loans.
Over and above loans are reduced to 31% of a home owners gross income.
However, this is not the only way mortgage reduction is carried out.
One option is having interest rates reduced by 2%.
When interest is lessened a borrower ultimately finds it simpler to repay a loan.
Apart from this the bank can extend the repayment period to 40 years, thereby making room for reduced monthly repayments.
Owing to the fact that banks can experience great losses due to loan modification the government added an additional incentive program particularly for borrowers.
Borrowers who make consistent payments every month of the year qualify to receive $1000 from the government.
This definitely ensures that any borrower will be motivated to carry out reliable payments without considering abandoning the loan.