Home Affordable Modification Program

Unemployment Mortgage Assistance And Foreclosure Alternatives–Can Jobless, by Turina Evelyn, PressReleasemag.com

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In these cases, where federal or proprietary home loan modifications are unavailable or unhelpful, unemployed homeowners may be able to participate in foreclosure alternatives programs which allow homeowners to surrender or sell their home and essentially be forgiven of their remaining mortgage debt. Short sale options, which have typically been used by homeowners in an underwater mortgage situation, and deed in lieu of foreclosure plans may be available to homeowners who have shown a previous ability to make the mortgage payment but, due to factors like unemployment, are simply unable to continue making home loan payments.

 

Foreclosure Prevention

The Federal Housing Finance Agency (FHFA) released its Third Quarter 2010 Foreclosure Prevention Refinance Report on the status of loan modifications at both Freddie Mac and Fannie Mae. Loan modifications through the Home Affordable Modification Program (HAMP) reportedly increased 16 percent in the quarter, although the overall volume of loan modifications and the pace of HAMP modifications declined from previous periods.

HAMP

The Home Affordable Modification Program (HAMP) was started in 2009 by the Obama Administration to bring forth a program to bring back financial stability to homeowners all over the country. The program addresses the major housing hardships that have been hurting our country, but like with sponsored programs, it has its flaws. HAMP was supposed to be designed to help lower homeowner’s payments by lowering their interest rate, changing the loan’s terms, and/or extending the length of the loan. However, now a year and a half into the program, we have observed failure much beyond what many expected.

 

Short Sale Program

Obviously, homeowners may still have to work with their mortgage servicer in some cases, but there or certain programs which offer grant-like assistance options to homeowners, borrowing opportunities for loans at 0% interest which may be forgiven, or even foreclosure alternative programs for homeowners who are simply in a situation where these assistants plans may not be beneficial. While homeowners may still contact their mortgage servicer to inquire about assistance, state housing agencies also have information regarding these state-specific programs which could be beneficial to homeowners in areas that are facing a greater than average number of home loan hardships.

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Obama Considers Foreclosure Ban, by Carrie Bay, Dsnews.com

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President Obama and his administration are floating an idea to prohibit lenders from foreclosing on a home unless the borrower has been considered for the government’s Home Affordable Modification Program (HAMP).

The proposal would require servicers to initiate contact with all borrowers who are 60 or more days behind on their mortgage payments and offer them access to the federal modification program. Only after the homeowner has been screened under the HAMP guidelines and it is determined that the loan cannot be saved, could foreclosure proceedings commence. The proposal would also halt any foreclosures already in process once a borrower has been accepted into the trial phase of the program.

The proposal was reviewed by lenders last week on a White House conference call and “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMPor reasonable contact efforts have failed,” Bloomberg Newsreported, citing a Treasury Department document outlining the plan.

Some lenders have been voluntarily suspending foreclosure proceedings while they evaluate a homeowner’s eligibility for HAMP, but under the program’s current guidelines there is no requirement to do so, and a number of homeowner advocacy groups have submitted complaints to the administration that even borrowers who are making their trial payments are being hit with foreclosure litigation.

A Treasury spokesperson confirmed that a foreclosure ban is under consideration, but stressed that it is one of many ideas on the table and has not been approved yet.

Laurie Goodman, a senior managing director at the Amherst Securities Group who has been highly critical of the government’s modification program, told the New York Times that even if the proposal came to pass, it would.

not be “a major change. We think there is a large public relations element to this,” she said.

As the Times noted, the government could use some favorable public relations for its modification program. Lawmakers have begun to openly express their disappointment with the program. On Thursday, members of the House Committee on Oversight and Government Reform said matter-of-factly in a report, that by every practical measure, “HAMP has failed.”

Reps. Darrell Issa (R-California) and Jim Jordan (R-Ohio) called the program a misuse of taxpayer money, theWashington Post said. The program has been allocated $75 billion to pay incentives to servicers, investors, and borrowers for loan restructurings, but the paper says that so far only $15 million has been spent.

As of the end of January, 116,297 troubled mortgages had been permanently modified under HAMP. About 830,000 more were in the trial phase of the program. The administration’s goal is to help three to four million borrowers save their homes through the program by the end of 2012.

News of a draft document by the Treasury outlining additional changes to HAMP also circulated this week. Besides the proposed ban on foreclosures until after aHAMP review, the administration is also considering implementing a mandatory 30-day appeal period for borrowers that are denied a federal modification. Servicers would not be allowed to proceed with a foreclosure sale during this time.

The proposal would also require servicers to prove that they have made multiple attempts to contact delinquent borrowers both by phone and via written notices, and would require them to consider HAMP applications from homeowners that have already filed for bankruptcy.

Lenders have expressed concern that the proposed requirements would prolong foreclosure delays beyond the current 12 month timeline that it typically takes to resolve the loans that don’t qualify for a modification.

Earlier this month at the American Securitization Forum’s annual meeting, Seth Wheeler, a senior advisor at the Treasury Department, told mortgage bond investors and lenders that the administration is also considering revising HAMP’s net present value (NPV) model in order to incorporate more principal writedowns into the equation. The NPV test is applied to determine if the mortgage owner can recoup more money by restructuring the loan or by foreclosing.

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Fannie Mae and Freddie Mac HARP Refinancings Increase in Third Quarter, Rismedia.com

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RISMEDIA, December 27, 2010—Refinancings through the Home Affordable Refinance Program (HARP) increased 26% in the third quarter of 2010. Fannie Mae and Freddie Mac loan modifications through the Home Affordable Modification Program (HAMP) increased 16% in the quarter, although the overall volume of loan modifications and the pace of HAMP modifications declined from previous periods. The data were released in FHFA’s Third Quarter 2010 Foreclosure Prevention & Refinance Report, which includes data on all of the Enterprises’ foreclosure prevention efforts.

Findings of the report include:

-Loans modified in the last three quarters are performing substantially better three months after modification, compared to loans modified in earlier periods.

-More than half of the loan modifications completed in the third quarter lowered borrowers’ monthly payments by over 30%.

-Loans that are 30-days delinquent increased by 17,600 loans or 2.7% during the third quarter to approximately 682,000.

-Loans 60-plus-days delinquent declined for the third consecutive quarter. The 60-plus-days delinquent loans decreased by 109,700 loans, or 6.8% during the third quarter to approximately 1.5 million.

-Nearly 35,400 HAMP trial modifications transitioned to permanent during the third quarter, bringing the total number of active HAMP permanent modifications to nearly 260,000.

For more information, visit http://www.fanniemae.com and freddiemac.com.

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Panel Is Critical of Obama Mortgage Modification Plan, by David Streitfeld, Nytimes.com

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The Treasury Department’s loan modification program, which has been criticized as ineffective almost since its inception, came in for another battering in a Congressional report released Tuesday.

Only about 750,000 households will be helped by the Home Affordable Modification Program, which pays banks to modify loans under Treasury guidelines. That is far fewer than the three million or four million modifications promised in early 2009 by the Obama administration, the Congressional Oversight Panel said.

The panel’s report calls the program a failure, although Senator Ted Kaufman, a Democrat from Delaware and chairman of the panel, declined to go that far in a conference call with reporters.

“The program has turned out to be a lot smaller and had a lot less impact on the housing market than we thought,” Mr. Kaufman said.

One reason: the loan servicers, who act as middlemen between the distressed homeowners and the investors who own the mortgage, often find it more profitable to foreclose than modify. The modification program provides incentives for servicers to participate in the program but no penalties for their failure to do so.

The oversight report estimated that the modification program would spend only about $4 billion of the $30 billion approved for it. With the deadline for reallocating the money having passed, “an untold number of borrowers may go without help,” the panel said.

Tim Massad, acting assistant secretary for financial stability, said at his own press briefing that the criticism was “somewhat unfair.”

Aside from the borrowers directly helped by the modification program, Mr. Massad said, many others have been helped indirectly, as servicers used the government standards in proprietary modifications.

The program “is having a real impact on the ground, even though I certainly acknowledge there are a lot of challenges and a lot of difficulties,” he said.

One of the challenges is a persistently weak housing market. Many households that have won permanent modifications are still heavily in debt, which leaves them vulnerable to redefaulting.

If the redefault level rises significantly, Mr. Kaufman said, “that’s a lot of taxpayer money down the drain with no effect.”

Other members of the oversight panel include Damon Silvers, director of policy and special counsel to the A.F.L.-C.I.O., and Richard H. Neiman, New York superintendent of banks.

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