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In 2009, the The Making Home Affordable program was introduced to help struggling home owners avoid default and foreclosure on their home loans, including FHA mortgages and equivalent programs for VA home loans.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Home Affordable Refinance and Loan Modification

January 5, 2011

In 2009, the The Making Home Affordable program was introduced to help struggling home owners avoid default and foreclosure on their home loans, including FHA mortgages and equivalent programs for VA home loans.

Under the new program, several loan modification and refinancing options became available. Those with FHA loans who qualify for help under these programs have many options to save the home, prevent foreclosure and get back on track with their mortgage payments. But with any new program or set of programs, there is often some confusion--what's the difference between loan modification and Home Affordable refinancing?

Under Making Home Affordable there are refinancing plans where eligible borrowers can get into more affordable monthly payments and lower interest rates. Refinancing is basically the creation of a new loan to replace the old one, using new terms and interest rates. Home Affordable Refinancing loans are for borrowers who are current on their mortgage payments--in this case, "current' is defined as being no more than 30 days late on any home loan payment in the last 12 months.

Home Affordable Loan Modification Programs are different; borrowers are eligible when they got their FHA mortgage or conventional home loan prior to January 1, 2009, and are "currently in trouble" making payments.

"Trouble" can be defined in many ways, including situations where a borrower sees a rapid increase in mortgage payments on variable rate loans. It can also include financial hardship related to job loss or other financial difficulty. Qualifying circumstances vary, it's best to ask about your specific set of issues connected to mortgage payments to see if you qualify for a Making Home Affordable program loan modification.

FHA loan modification is not the same as refinancing a mortgage. When a loan is modified, some of the original mortgage may be forgiven. You may need to renegotiate the terms of your existing loan or have the mortgage changed to lower payments, interest rates, or both. All of these changes are made to the original home loan rather than applying for a brand new mortgage.

Either course of action is appropriate for qualified borrowers; much depends on the needs of the homeowner and whether their circumstances allow them to participate in a particular Making Home Affordable program. Each option under Making Home Affordable has its own terms, requirements and expiration dates.

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