The Obama administration has announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the administration's Homeowner Affordability and Stability Plan.
The release of detailed requirements for the Making Home Affordable program facilitates implementation of provisions that the administration believes will help bring relief to responsible but struggling homeowners, while preventing communities from suffering the negative spillover effects of foreclosure.
‘Two weeks ago, the president laid out a clear path forward to helping up to 9 million families restructure or refinance their mortgages to a payment that is affordable now and into the future. Today, we are providing servicers with the details they need to begin helping eligible borrowers,’ says Treasury Secretary Tim Geithner. ‘It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive. Economic recovery requires action on all three fronts.’
The guidelines will implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications. The Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program.
The program guidelines instruct servicers to use the standard waterfall process in reducing borrowers' mortgage payments. They also clarify eligibility requirements, modification terms, approval conditions, and fees and charges, as well as which valuation methods are acceptable. The Treasury has also outlined how trial periods will work, including situations in which the Federal Housing Administration's Hope for Homeowners program is explored.
‘This step forward represents a tremendous coordinated effort between major government and regulatory agencies to help bring relief to America's housing market and homeowners," adds Shaun Donovan, secretary of the U.S. Department of Housing & Urban Development. "This plan will help make homeownership more affordable for 9 million American families and, in doing so, help to stop the damaging impact that declining home prices have on all Americans.’
The federal bank, thrift and credit union regulatory agencies have released a joint statement, in which they say incentives made to homeowners, servicers and investors "should help responsible homeowners remain in their homes and avoid foreclosure, thereby erasing downward pressures on house prices in many parts of the country and averting costs to families, communities and the economy from avoidable foreclosures."