WASHINGTON--The Obama administration on Friday announced a new program to help homeowners in trouble with their mortgages. Here are some frequently asked questions and answers about the program intended to help avoid foreclosures.
Below, from the Treasury Department:
On March 26, 2010, the Administration announced several enhancements to the existing Making Home Affordable Program (MHA) and the Federal Housing Administration (FHA) refinance program that will give a greater number of responsible borrowers an opportunity to remain in their homes and reduce costly foreclosures. The changes will improve the effectiveness of the existing MHA program by providing temporary assistance for unemployed homeowners while they search for re-employment, providing servicers and lenders more flexibility to reduce mortgage principal for underwater borrowers, increasing incentive to servicers to participate in MHA, facilitating transitions to more sustainable housing for borrowers who do not succeed within the HAMP program, and expanding opportunities to refinance into affordable FHA loans for underwater borrowers.
Q: When will homeowners begin to receive help under the new enhancements?
It will take time to get these new program enhancements up and running. Some pieces, such as increased payments for alternatives to foreclosures, will be put in place in the coming weeks. We anticipate the full set of programs to be available by the fall.
Q: How can I learn more about these beneficial changes?
Fact sheets are posted on www.makinghomeaffordable.gov. More details will be published as they become available.
Q: I am unemployed and having difficulty paying my mortgage. What benefits are available
under the Temporary Assistance for Unemployed Borrowers?
The program will require services to provide a minimum of 3 months, and up to six months for
some borrowers, of temporary forbearance for eligible unemployed borrowers, during which
their payments will be reduced to no more than 31 percent of their monthly income. After the
forbearance period, borrowers will be evaluated for a HAMP modification if they have a
mortgage payment greater than 31 percent of their monthly income and meet other income
documentation and property eligibility requirements. The temporary assistance will enable
unemployed homeowners to remain in their homes as they continue to seek employment. If the
forbearance period ends without re-employment, the homeowner may be considered for a HAMP
program supporting alternatives to foreclosure including short-sales.
Q: How do I know if I qualify for the temporary assistance for unemployed homeowners?
Servicers participating in HAMP will be required to offer assistance to all unemployed
borrowers who meet these eligibility criteria:
Homeowner's mortgage meets HAMP eligibility requirements, including that the house
is owner-occupied and the loan balance is below $729,000.
Borrower submits evidence that they are receiving unemployment insurance (UI)
Borrower must request temporary assistance in the first 90 days of delinquency.
Q: I think I may be eligible for the temporary assistance for unemployed homeowners. When
will this program be available to eligible borrowers?
We will move to implement this as quickly as possible and expect it to be offered within the next
few months. Some major investors and servicers have similar programs in place today.
Q: If I qualify for the forbearance period, will I be eligible for a HAMP modification at the
end of the forbearance period if I become employed?
At the end of the temporary assistance period, homeowners who have a mortgage payment
greater than 31 percent of their monthly income must be considered for a permanent HAMP
modification. To receive the permanent HAMP modification, homeowners must verify
qualifying income with standard documentation and must be current on forbearance plan
payments, and the modified loan must pass the standard net present value (NPV) test. It is
important to note that unemployment insurance will not be counted as income when a
homeowner is evaluated for HAMP at the end of the forbearance plan. Not all unemployed
homeowners will receive a HAMP modification at the end of the temporary assistance period.
Q: What happens at the end of the forbearance period if I have not found a new job and can't
get a HAMP modification?
After the forbearance period, if the borrower cannot qualify for a HAMP modification their
lender will be required to consider them for an alternative to foreclosure, such as a short sale or
deed-in-lieu of foreclosure as part of the Home Affordable Foreclosure Alternatives Program
Q: I owe more on my house than it is worth. How do the HAMP changes help me and other
Homeowners who are significantly underwater and who are eligible for the HAMP program will
benefit from changes that will motivate lenders to writedown more principal. This will help
homeowners regain some of the equity lost due to severe home price declines in many regions of
the country. The changes will require all servicers to consider an alternative modification
approach which includes writedown of some principal for loans that are over 115 percent of the
current value of the property (LTV). Servicers will earn increased incentives for offering
principal writedowns in conjunction with a HAMP modification. The alternative payment
reduction option will allow homeowners to regain lost equity in their homes just by remaining
current on their modified payments. Servicers will initially forbear some or all of the principal
balance over 115 percent LTV as needed to bring the borrower's payment to 31 percent of
income. Then, servicers will forgive this forborne amount in three equal amounts over 3 years, as
long as homeowner remains current on payments.
Q: How do I know if I qualify for principal reduction in HAMP?
If your property is worth at least 15 percent less than the amount of your first mortgage you may
be eligible, but not every underwater borrower will benefit from principal reduction through the
HAMP program. Your servicer or investor will contact you if you are eligible.
Q: Will these changes require my servicer to write down my principal?
No, principal writedown will not be required. However, we are providing increased financial
incentives and expect that where principal write-down yields a greater economic benefit, based
on the net present value (NPV) test comparison, lenders will generally choose to pursue the
principal writedown option when they are legally permitted to do so.
Q: I have an existing HAMP modification. Will I be able to take advantage of the new
principal forgiveness program?
Possibly. The increased incentives will be available to servicers who elect to review loan that
have already been modified under HAMP to determine if principal forgiveness would help bring
those mortgages closer to a market value.
Q. I have both a first and a second lien, is there any payment assistance available for my
Yes, many borrowers whose first mortgages are permanently modified under HAMP may now
be eligible for payment relief on their second lien if their servicer is participating in the Second
Lien Modification Program (2MP). We have increased incentives in this program to encourage
servicers and investors to either forgive all or a portion of qualifying second liens
Q: I have applied for a HAMP modification but continue to receive notices from my servicer
that I am in foreclosure. Are there new protections to prevent the servicer from selling my
home while I am being considered for the HAMP modification?
Yes. New and clarifying guidance provides protection for responsible borrowers against
initiation of costly and unnecessary foreclosures while the borrower is being considered for
HAMP. The guidance clarifies the solicitation requirements for borrower eligible for HAMP,
including mail and phone outreach. In addition, the guidance provides improvements in
communication about the foreclosure process to reduce confusion for borrowers who are
simultaneously in foreclosure and either being evaluated for HAMP or in a trial payment plan.
Also, the guidance requires written certification that a borrower is not HAMP eligible before an
attorney or trustee can conduct a foreclosure sale.
Q: I was told that I did not qualify for HAMP because I have filed for bankruptcy protection.
How will the new enhancement impact me?
As a result of the new guidance, servicers are required to consider a borrower in bankruptcy for
HAMP if the borrower or the borrower's bankruptcy counsel asks for help. The guidance also
includes new features to facilitate the process for them.
Q: I was unable to complete all my payments under the HAMP trial modification plan and
would like to pursue a short sale. How will the new program enhancements help me pursue
this alternative to foreclosure?
Yes. The Home Affordable Foreclosure Alternative (HAFA) program, which includes short
sales and deed-in-lieu of foreclosure, is available for borrowers who are generally eligible for
HAMP but do not qualify for or complete a HAMP trial period plan. The Administration will
provide additional incentive payments to servicers and double borrower relocation assistance
payments to $3,000 in order to encourage greater use of HAFA short-sales and deeds-in-lieu.
These options benefit borrowers by avoiding complicated and lengthy foreclosure proceedings
and by helping borrowers defer relocation expenses and transition costs as they seek more
FHA Refinance Options
Q: I owe more on my home than it is worth. How can the FHA Refinance option help me as
an underwater borrower?
The Federal Housing Administration (FHA) is making some changes to its existing refinancing
program guidelines that will allow more lenders to perform mortgage principal write-down for
underwater homeowners in mortgages not currently insured by FHA. These adjustments will
provide more opportunities for qualifying mortgage loans to be responsibly restructured and
refinanced into FHA loans as long as the borrower is current on the mortgage and the lender or
investor writes down the unpaid principal balance of their mortgage by at least 10 percent of the
original first lien of the borrower. A second lien write-down program will be paired with these
changes to encourage further write-down of second liens such that total mortgage debt (first and
second liens) is no greater than 115 percent of the current value of the home.
Q: Am I eligible for a FHA Refinance loan?
This is a voluntary refinancing and lenders must agree to the writedown. However, the new
FHA refinance option is only available to responsible homeowners who are current on an
existing mortgage that is not insured by FHA. Eligible borrowers must occupy the home as the
primary residence and will also have to meet FHA standard documentation and other
underwriting requirements. In addition, to participate in the program, all homes will be appraised
to determine current market value. The LTV loan for the new FHA loan must be no greater than
97.75 percent of the appraised value of the home.
Q: When will the FHA Refinance loan be available to underwater borrowers?
FHA will move to implement this as quickly as possible and expect that lenders can begin
making decisions by the fall. Specific guidelines will be posted in a FHA Mortgagee Letter in
the near future.
Q: How do I apply for an FHA refinance loan?
Because this program is voluntary for lenders, not all underwater borrowers who meet the
eligibility standards will receive an FHA refinance loan. You will be notified by your lender if
you have been selected to participate in the program.
Q: I have an FHA-insured loan. Why am I not eligible for this principal forgiveness?
FHA-insured borrowers are currently eligible for extensive loss mitigation assistance to prevent
foreclosure and make mortgage payments more affordable. FHA is currently prohibited by
statute from offering explicit principal forgiveness to FHA-insured loans.
Below, from the Treasury Department....
HOUSING PROGRAM ENHANCEMENTS OFFER ADDITIONAL
OPTIONS FOR STRUGGLING HOMEOWNERS
Refinements to Existing Administration Programs Designed to Help Unemployed,
Underwater Borrowers While Helping Administration Meet its Goals
WASHINGTON - Today, as part of its ongoing commitment to continuously improve housing relief efforts, the Administration announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs. These program adjustments will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own. The program modifications will expand flexibility for mortgage servicers and originators to assist more unemployed homeowners and to help more people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values. These changes will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP).
Housing Policy Overview
The Administration's goal is to promote stability for both the housing market and homeowners. To meet these objectives, the Administration has developed a comprehensive approach using state and local housing agency initiatives, tax credits for homebuyers, neighborhood stabilization and community development programs, mortgage modifications and refinancing, and support for Fannie Mae and Freddie Mac. The Administration's efforts for homeowners have focused on giving responsible households an opportunity to remain in their homes when possible while they get back up on their feet, or to relocate to a more sustainable living situation. Today, mortgage rates are at record lows and, thanks in large part to these programs, more than four million homeowners have refinanced their mortgages to more affordable levels helping to save more than $7 billion annually, more than one million are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing.
Even with this success, we continue to see challenges. Servicers were slow to implement HAMP, resulting in a slow start for the program. Recent improvements in the program have accelerated the pace of modifications, and the adjustments announced today will improve performance. But our strategy to address the crisis must evolve because our challenges have also evolved.
Our housing initiatives must balance the need to help responsible homeowners struggling to stay in their homes, with the recognition that we cannot and should not help everyone. The President has said: "We can't stop every foreclosure." And in fact, we can't maintain the balance described above if we assist every borrower. For example, investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures and, when necessary, must facilitate the transition to a more sustainable housing situation. The adjustments announced today are tailored to accomplish these goals by helping a targeted group of borrowers.
Eligible homeowners for modifications under HAMP must, for example: live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship. The new flexibilities for the modification initiative announced today continue to target this group of homeowners.
The FHA refinance options being announced today will provide more opportunities for lenders to restructure loans for some families who owe more than their home is worth. This is a voluntary program for lenders and homeowners. The population eligible for a FHA refinance must be current on their mortgage. This rewards responsible homeowners and creates stabilizing incentives in the housing market.
Taken together, the Administration's broad housing initiatives and the new flexibilities announced today will offer a second chance to millions of responsible, middle-class American families struggling to stay in their homes and will help to stabilize our households, neighborhoods and communities.
Background on Housing Program Initiatives to Date
The Administration has taken a broad set of actions to stabilize the housing market and help American homeowners. These efforts are having an impact on our housing markets - we are seeing signs of stabilization. Looking back to over a year ago - stress in the financial system had severely reduced the supply of mortgage credit, limiting the ability of Americans to buy homes or refinance mortgages. Millions of responsible families who had made their monthly payments had fulfilled their obligations saw their property values fall, and found themselves unable to refinance at lower mortgage rates.
In February 2009, less than one month after taking office, President Obama announced the Homeowner Affordability and Stability Plan. As part of this plan and through other housing initiatives, the Administration has taken the following actions to strengthen the housing market:
Actions Supporting Market Stability and Access to Affordable Mortgage Credit
· Provided strong support to Fannie Mae and Freddie Mac to ensure continued access to affordable mortgage credit across the market;
· Together, Treasury and the Federal Reserve have purchased more than $1.4 trillion in agency mortgage backed securities, which have helped keep mortgage rates at historic lows, allowing homeowners to access credit to purchase new homes and refinance into more affordable monthly payments; and
· The FHA has played an important counter-cyclical role, providing liquidity for housing purchases at a time when private lending has declined.
Actions Helping Homeowners Purchase Homes, Refinance and Modify Mortgages to More Affordable Payments, Prevent Foreclosures and Stabilize Communities
· Launched a modification initiative to help homeowners reduce mortgage payments to affordable levels and to prevent avoidable foreclosures;
· Supported expanding the limits for loans guaranteed by Fannie Mae, Freddie Mac, and FHA from previous limits up to $625,500 per loan to $729,750;
· Expanded refinancing flexibilities for the Fannie Mae and Freddie Mac loans, particularly for borrowers with negative equity, to allow more Americans to refinance;
· Launched a $23.5 billion Housing Finance Agencies Initiative which is helping more than 90 state and local housing finance agencies across 49 states provide sustainable homeownership and rental resources for American families;
· Supported the First Time Homebuyer Tax Credit, which has helped hundreds of thousands of responsible Americans purchase homes.
· Through the Recovery Act is providing over $5 billion in support for affordable rental housing through low income housing tax credit programs and $2 billion in support for the Neighborhood Stabilization Program to restore neighborhoods hardest hit by concentrated foreclosures; and
· On February 19, 2010, the Administration announced the $1.5 billion HFA Hardest Hit Fund for housing finance agencies in the nation's hardest hit housing markets to design innovative, locally targeted foreclosure prevention programs.
Historically low mortgage rates along with expanded refinancing flexibilities for Fannie Mae and Freddie Mac loans have helped more than four million American homeowners with Fannie Mae and Freddie Mac loans to refinance, saving an estimated $150 per month on average and more than $7 billion in total. HAMP has provided more than 1 million struggling homeowners a second chance to stay in their homes - with each homeowner in a modification saving more than $500 per month on average.
Together, these initiatives are having an impact - strengthening the housing market, helping responsible homeowners prevent avoidable foreclosures and rebuilding communities and neighborhoods. Today mortgage rates remain at historic lows - the primary interest rate is now about 5 percent, lower than at any time in the three decades before the crisis. We are also seeing encouraging signs in housing indicators - home prices and the pace of home sales have stabilized in recent months.