Officials announced Thursday that under President Obama's foreclosure prevention program more than 55,000 homeowners received loan modification offers.
"If a modification is not possible, we are also announcing steps to encourage the quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future," said Treasury Secretary Geithner."These are critical steps in stemming the foreclosure crisis and stabilizing the housing market, both of which are critical to our economic recovery."
Administration officials has also announced they are expanding the program to help homeowners who are delinquent and do not qualify for a modification.
The Administration had previously announced details of other new options 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 home equity loans as well as a set of measures designed to integrate Hope for Homeowners in the Making Home Affordable program.
The administration believes that 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 work to 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 the Administration, allowing servicers to target second lien extinguished to the borrowers where extinguishment is most appropriate.
The administration announcement also included support for the Hope for Homeowners refinance program, which provides additional opportunities for homeowners to keep their homes in difficult times. 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 home's 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 to qualify. The new guidelines will require servicers 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.
Another program that we hear is coming is raising the minimum 105% LTV to 125%. This will for sure help more homeowners. Let's hope this goes through. It will really be what we need to get things rolling. We'll keep you posted as more information is available.
The administration estimates the refinancing and modification plans will help approximately 9 million people avoid foreclosure.
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