Obama Administration announces new details on Making Home Affordable ProgramMortgagePress.comforeclosures, Barack Obama, Making Home Affordable Program, Tim Geithner, Shaun Donovan, first lien modifications
The Obama Administration has announced the details of new
efforts to help bring relief to responsible homeowners under the
Making Home Affordable Program, including an effort to achieve
greater affordability for homeowners by lowering payments on their
second mortgages as well as a set of measures to help underwater
borrowers stay in their homes.
"With these latest program details, we're offering even more
opportunities for borrowers to make their homes more affordable
under the Administrations housing plan," said Treasury Secretary
Tim Geithner. "Ensuring that responsible homeowners can afford to
stay in their homes is critical to stabilizing the housing market,
which is in turn critical to stabilizing our financial system
overall. Every step we take forward is done with that imperative in
mind."
"Today's announcements will make it easier for borrowers to
modify or refinance their loans under FHA's Hope for Homeowners
program," said HUD Secretary Shaun Donovan. "We encourage Congress
to enact the necessary legislative changes to make the Hope for
Homeowners program an integral part of the Making Home Affordable
Program."
The Second Lien Program announced will work in tandem with first
lien modifications offered under the Home Affordable Modification
Program to deliver a comprehensive affordability solution for
struggling borrowers. Second mortgages can create significant
challenges in helping borrowers avoid foreclosure, even when a
first lien is modified. Up to 50 percent of at-risk mortgages have
second liens, and many properties in foreclosure have more than one
lien. Under the Second Lien Program, when a Home Affordable
Modification is initiated on a first lien, servicers participating
in the Second Lien Program will automatically reduce payments on
the associated second lien according to a pre-set protocol.
Alternatively, servicers will have the option to extinguish the
second lien in return for a lump sum payment under a pre-set
formula determined by Treasury, allowing servicers to target
principal extinguishment to the borrowers where extinguishment is
most appropriate.
Separately, the Administration has also announced steps to
incorporate the Federal Housing Administrations (FHA) Hope for
Homeowners into Making Home Affordable. Hope for Homeowners
requires the holder of the mortgage to accept a payoff below the
current market value of the home, allowing the borrower to
refinance into a new FHA-guaranteed loan. Refinancing into a new
loan below the homes market value takes a borrower from a position
of being underwater to having equity in their home. By increasing a
homeowners equity in the home, Hope for Homeowners can produce a
better outcome for borrowers who qualify.
Under the changes announced today and, when evaluating borrowers
for a Home Affordable Modification, servicers will be required to
determine eligibility for a Hope for Homeowners refinancing. Where
Hope for Homeowners proves to be viable, the servicer must offer
this option to the borrower. To ensure proper alignment of
incentives, servicers and lenders will receive pay-for-success
payments for Hope for Homeowners refinancings similar to those
offered for Home Affordable Modifications. These additional
supports are designed to work in tandem and take effect with the
improved and expanded program under consideration by Congress. The
Administration supports legislation to strengthen Hope for
Homeowners so that it can function effectively as an integral part
of the Making Home Affordable Program.
Making Home Affordable, a comprehensive plan to stabilize the
U.S. housing market, was first announced by the Administration on
February 18. The three part program includes aggressive measures to
support low mortgage rates by strengthening confidence in Fannie
Mae and Freddie Mac; a Home Affordable Refinance Program, which
will provide new access to refinancing for up to 4 to 5 million
homeowners; and a Home Affordable Modification Program, which will
reduce monthly payments on existing first lien mortgages for up to
3 to 4 million at-risk homeowners. Two weeks later, the
Administration published detailed guidelines for the Home
Affordable Modification Program and authorized servicers to begin
modifications under the plan immediately. Twelve servicers,
including the five largest, have now signed contracts and begun
modifications under the program. Between loans covered by these
servicers and loans owned or securitized by Fannie Mae or Freddie
Mac, more than 75 percent of all loans in the country are now
covered by the Making Home Affordable Program.
Continuing to bolster its outreach around the program, the
Administration also announced a new effort to engage directly with
homeowners via MakingHomeAffordable.gov.
Homeowners will now have the ability to submit individual questions
through the website to the Administration's housing team. Members
of the Treasury and HUD staffs will periodically select commonly
asked questions and post responses on MakingHomeAffordable.gov. To
submit a question, homeowners can visit www.MakingHomeAffordable.gov/feedback.html.
Selected questions from homeowners across the country and responses
from the Administration will be available at www.MakingHomeAffordable.gov/asked-and-answered.html.
For additional details on the program, click
here for a Fact Sheet and click
here for Two Case Examples.
