MHA Adds New Incentives

king Home Affordable program (MHA) is once again adding to its stable of incentives, this time encouraging lenders and servicers to explore short sales and deeds-in-lieu of foreclosures as well as restructuring the compensation rate for modifications on loans in areas where home values have seen the steepest declines. New details around foreclosure alternatives will ‘simplify and streamline the process of pursuing short sales and deeds-in-lieu, which will facilitate the ability of more servicers and borrowers to utilize the program,’ according to a statement from the Treasury Department. "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 Tim Geithner. "These are critical steps in stemming the foreclosure crisis and stabilizing the housing market, both of which are critical to our economic recovery." The program provides a standard process flow, minimum performance time frames and standard documentation, and it offers financial incentives to servicers and borrowers to pursue these alternatives to foreclosure, according to the Treasury statement. Servicers can receive up to $1,000 for the successful completion of a short sale or deed-in-lieu; borrowers can receive up to $1,500 to cover relocation expenses; and the Treasury will share the cost of paying junior lienholders to release their claims, matching $1 for every $2 paid by the investors, up to a total Treasury contribution of $1,000, the department's [link=http://www.treas.gov/press/releases/docs/05142009FactSheet-MakingHomesAffordable.pdf][u]fact sheet[/u][/link] says. Under the program, servicers will allow borrowers at least 90 days, and up to one year, to market and sell the property. Marketing of the property may run concurrently with the foreclosure process, but no foreclosure sale can take place during the marketing period specified in the short sale agreement, provided the borrower is acting in good faith to sell the property. Servicers will have the option to include a provision within the short sale agreement in which the borrower agrees to a deed-in-lieu if the property does not sell within the specified time period. Up to $10 billion has been allocated for Home Price Decline Protection (HPDP) incentives, which provide compensation based on recent home price declines – a process that was borne out of insights offered by the Federal Deposit Insurance Corp. and its chair, Sheila Bair. The payments will help cover the incremental collateral loss on modifications that do not succeed, the Treasury says, and they will be linked to the rate of recent price declines in local housing markets, as well as the average cost of a home in a market. According to the statement, historically low interest rates have led more than 1 million borrower to refinance loans since MHA launched, and thousands of underwater borrowers have refinanced under the program's Home Affordable Refinance component. Fannie Mae has had over 233,000 eligible refinance applications through its refinancing program, with more than 51,000 of these having loan-to-value ratios between 80% and 105%. Additionally, more than 55,000 Home Affordable Modification offers have been extended to qualifying borrowers, and more than 300,000 letters have been sent to homeowners that are potentially eligible for the program. Department of Housing and Urban Development Secretary Shaun Donovan also announced that HUD has requested $100 million to be invested in the agency's Housing Counseling Assistance Program for fiscal year 2010. That number represents a $35 million increase from this year's budget. "This investment will help further support the work of our 2,600 HUD-approved housing counselors across the nation, just like those at [the National Community Reinvestment Coalition], who play a key role in ensuring that borrowers can take part in the modification and refinancing options made available through Making Home Affordable," Donovan said. SOURCE: MakingHomeAfforda

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