Making Home Affordable Program Extended, QM Rules Modified


Despite signs that the U.S. housing market is on the mend, millions of homeowners are still struggling to pay their mortgages. To provide them with more assistance and speed the recovery, the Obama administration on Wednesday extended the deadline to apply for the Making Home Affordable Program, which provides relief to homeowners facing foreclosure, from Dec. 31, 2013, to Dec. 31, 2015.

The new deadline, determined in coordination with the U.S. Department of the Treasury, the U.S. Department of Housing and Urban Development, and the Federal Housing Finance Agency (FHFA), aligns with the extended deadlines for the Home Affordable Refinance Program (HARP) and the Streamlined Modification Initiative for homeowners with loans owned or guaranteed by government-sponsored enterprises Fannie Mae and Freddie Mac.

In a statement, Treasury Secretary Jacob J. Lew said the extension ‘will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry.’

The administration also approved a set of amendments that loosen the requirements under the qualified mortgage (QM) rules for community banks and credit unions that go into effect next year, as well as readjusting how loan origination compensation is calculated.

The new rules, which are part and parcel of the Dodd-Frank bill, require banks to verify borrowers' finances and prohibit the so-called ‘no-doc loans’ that helped spur the housing crisis that began in late 2007.

Nearly 1.3 million Americans have benefited from the Making Home Affordable Program since its launch in March 2009. The program includes the Home Affordable Modification Program (HAMP), which modifies the terms of a homeowner's mortgage to reduce the monthly payment. As of March, more than 1.1 million homeowners have received a permanent modification of their mortgage through HAMP, which delivers a higher median savings than most private loan modifications.

The Making Home Affordable Program, which has been tweaked numerous times since its introduction, also promulgates new industry standards for how homeowners are evaluated for assistance before being referred to foreclosure.

The amendments announced Thursday extend QM status to certain loans that creditors hold in their portfolio even if the consumer's debt-to-income ratio exceeds 43%. Initially, the Dodd-Frank bill required that the monthly payments of potential borrowers could not total more than 43% of their income to qualify.

In addition, the amendments allow small creditors to charge a higher annual percentage rate (up to 3.5% over the average prime) for certain first-lien loans while maintaining a safe harbor for the repay requirements. They also provide for a two-year transition period for small lenders to continue making loans while the CFPB studies whether the definition of ‘rural’ or ‘underserved’ needs to be changed.

Overall, the amendments were warmly received by the mortgage banking industry. David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), said the changes demonstrate that the CFPB is ‘listening to the broad constituency of organizations involved in housing finance.’

‘Today's announcement makes important changes to the rule that will benefit consumers by better allowing lenders of all shapes and sizes, including nonprofit entities, to help and serve borrowers,’ Stevens said in a statement. ‘We are pleased at the adjustments made to the rule as it relates to smaller lenders, regardless of business model, that will allow them to continue to provide the safe and sustainable mortgage products that they are currently offering their borrowers.

‘We also welcome the stipulation that compensation paid by brokers and lenders to loan originator employees do not count toward the points and fees threshold for what constitutes a 'Qualified Mortgage,'’ Stevens added. ‘Both of these provisions should facilitate a more efficient and affordable marketplace for borrowers.’

The American Bankers Association (ABA) expressed support for the change to exclude the compensation. However, Robert Davis, ABA's executive vice president, mortgage markets, financial management and public policy, said there are still concerns that the new mortgage rules will restrict lending.

"The likely response is that many lenders will seek protection in ever more conservative underwriting standards, jeopardizing the housing recovery,’ Davis told The Hill on Wednesday. ‘Congress and the agency should address this problem by shifting most of the effective dates to January 2015.’

Tracy Mooney, senior vice president of single family servicing and REO at Freddie Mac, applauded the deadline extension, saying HAMP ‘has played a critical role in the housing recovery.’ He said of 830,000 borrowers that Freddie Mac has helped avoid foreclosure since 2009, nearly 230,000 were helped through HAMP.

Leslie Peeler, senior vice president, National Servicing Organization, at Fannie Mae, said the HAMP extension and streamlined modification amendments ‘will benefit struggling homeowners across the country.’

‘We will continue to work with FHFA to implement these extensions and provide guidance to servicers,’ Peeler added.

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