President Barack Obama unveiled the Homeowner Affordability and Stability Plan last week, a $75 billion program intended to help responsible homeowners who are facing hardships and unable to afford their monthly payments, as well as those affected by falling home prices who now owe significantly more than their homes are worth.
Strategies of the plan include:
-Enabling as many as five million currently ineligible homeowners who receive their mortgages through the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to refinance at lower rates.
-Providing new incentives for lenders and borrowers to modify the terms of loans at risk of default and foreclosure. Lenders wishing to receive financial assistance from the government will be requested to adhere to guidelines.
-Directing funds already approved by Congress for this purpose to enable the Treasury Department and Federal Reserve to continue purchasing mortgage backed securities from Fannie Mae and Freddie Mac.
ENABLING MORE REFINANCES TO TAKE ADVANTAGE OF CURRENT LOW RATES
The plan permits Fannie Mae and Freddie Mac to purchase or guarantee refinance loans for borrowers who owe more than 80% of their home's value--including those with loan to value ratios up to 105%. Current requirements restrict a borrower's refinance opportunities.
$75 BILLION HOMEOWNER STABILITY INITIATIVE
-For servicers willing to reduce the monthly housing payment to 38% of monthly income, the Treasury will pay half the cost of further reducing the payment down to 31% of monthly income.
-Participating servicers will receive an upfront incentive fee of $1,000, and an additional $1,000 each year that the loan stays current (for three years).
-Servicers also will receive an additional incentive payment of $500, and the mortgage holder an incentive payment of $1,500 for modifying at risk borrowers before the borrower fall behind.
-Participating mortgage holders also will receive an "insurance" payment based on the extent home values decline after the modification.
-Borrowers will receive a $1,000 payment towards reducing principal each year he or she remains in the home for the first five years.
-The Treasury will develop, by March 4, uniform guidance for loan modifications that would be used by Fannie Mae and Freddie Mac, and financial institutions receiving new financial assistance from the government.
STRENGTHENING FANNIE MAE AND FREDDIE MAC TO IMPACT MORTGAGE RATES
In an effort to keep mortgage rate slow, the Treasury will increase its investment in Fannie Mae and Freddie mac by another $100 billion each. It also will allow them to add more mortgages to their portfolios.
OTHER FORECLOSURE PREVENTION MEASURES
Other measures include:
-Legislative proposals to allow judicial modification of mortgages for borrowers declaring bankruptcy and to improve the Hope for Homeowners program.
-Relocation assistance to renters displaced by foreclosure on their landlord's property
-$2 billion in Neighborhood Stabilization funds.
Strategies of the plan include:
-Enabling as many as five million currently ineligible homeowners who receive their mortgages through the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to refinance at lower rates.
-Providing new incentives for lenders and borrowers to modify the terms of loans at risk of default and foreclosure. Lenders wishing to receive financial assistance from the government will be requested to adhere to guidelines.
-Directing funds already approved by Congress for this purpose to enable the Treasury Department and Federal Reserve to continue purchasing mortgage backed securities from Fannie Mae and Freddie Mac.
ENABLING MORE REFINANCES TO TAKE ADVANTAGE OF CURRENT LOW RATES
The plan permits Fannie Mae and Freddie Mac to purchase or guarantee refinance loans for borrowers who owe more than 80% of their home's value--including those with loan to value ratios up to 105%. Current requirements restrict a borrower's refinance opportunities.
$75 BILLION HOMEOWNER STABILITY INITIATIVE
-For servicers willing to reduce the monthly housing payment to 38% of monthly income, the Treasury will pay half the cost of further reducing the payment down to 31% of monthly income.
-Participating servicers will receive an upfront incentive fee of $1,000, and an additional $1,000 each year that the loan stays current (for three years).
-Servicers also will receive an additional incentive payment of $500, and the mortgage holder an incentive payment of $1,500 for modifying at risk borrowers before the borrower fall behind.
-Participating mortgage holders also will receive an "insurance" payment based on the extent home values decline after the modification.
-Borrowers will receive a $1,000 payment towards reducing principal each year he or she remains in the home for the first five years.
-The Treasury will develop, by March 4, uniform guidance for loan modifications that would be used by Fannie Mae and Freddie Mac, and financial institutions receiving new financial assistance from the government.
STRENGTHENING FANNIE MAE AND FREDDIE MAC TO IMPACT MORTGAGE RATES
In an effort to keep mortgage rate slow, the Treasury will increase its investment in Fannie Mae and Freddie mac by another $100 billion each. It also will allow them to add more mortgages to their portfolios.
OTHER FORECLOSURE PREVENTION MEASURES
Other measures include:
-Legislative proposals to allow judicial modification of mortgages for borrowers declaring bankruptcy and to improve the Hope for Homeowners program.
-Relocation assistance to renters displaced by foreclosure on their landlord's property
-$2 billion in Neighborhood Stabilization funds.
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