On February 18, 2009 the Obama Administration introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize the housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.

The Home Affordable Refinance Program gives the opportunity for up to 4 to 5 million homeowners with conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance into a fixed-rate, lower cost mortgage.

To be eligible, applicants must:

• Be owner-occupants of 1-4 unit properties
• Be current on their mortgage payments
• Have a first lien mortgage that does not exceed 125 percent of the current market value of the property
• Have a reasonable ability to pay the new mortgage payment; and,
• The refinance must improve the long term affordability or stability of the loan.

The Home Affordable Modification Program (HAMP) commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

To be eligible, applicants must:

• Be owner-occupants of 1-4 unit properties
• Have an unpaid principal balance that is equal to or lesser than:
  1 Unit: $729,750
  2 Units: $934,200
  3 Units: $1,129,250
  4 Units: $1,403,400
• Have a first lien mortgage that was originated on or before January 1, 2009
• Have a monthly mortgage payment (including taxes, insurance and home owners association dues) greater than 31 percent of their monthly gross (pre-tax) income; and,
• Have a mortgage payment that is not affordable due to financial hardship that can be documented.

The owner's mortgage-holder must agree to participate and modify the loan to bring mortgage payments down to 31% of income for at least five years and to permanently cap the mortgage loan rate. To encourage participation, the government will pay part of the cost of the reduction and provide incentive payments to the lender, servicer and homeowner, with extra incentives for modifications made before a loan goes into default.

The Home Affordable Modification Program requires borrowers to enter into a Trial Period Plan before receiving a permanent Home Affordable Modification. During this period, borrowers must submit trial payments and submit all required forms and documents.

The consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration's program. Through the website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a checklist of key documents and materials to have ready when making a call to their servicer as well as FAQs from borrowers in similar circumstances.

On April 28, 2009, the Obama Administration announced the Second Lien Program to work in tandem with first lien modifications offered under HAMP. Second mortgages have created a significant challenge in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50 percent of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate.

On November 30, 2009, The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) kicked off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Home Affordable Modification Program (HAMP) convert to permanent modifications.

The Mortgage Modification Conversion Drive includes the following:

• Servicer Accountability. As part of the Administration's ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:
  • Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae "account liaisons" are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer's plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.
  • Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.
  • The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.
  • Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.
• Web tools for borrowers. Because the document submission process can be a challenge for many borrowers, the Administration has created new resources on www.MakingHomeAffordable.gov to simplify and streamline this step. New resources include:
  • Links to all of the required documents and an income verification checklist to help borrowers request a modification in 4 easy steps;
  • Comprehensive information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and a new instructional video which provides step by step instructions for borrowers;
  • A toolkit for partner organizations to directly assist their constituents;
  • New web banners and tools for outreach partners to drive more borrowers to the site and Homeowner's HOPE Hotline (888-995-HOPE).

More information about the Conversion Drive can be found at:

http://www.financialstability.gov/latest/tg_11302009b.html

Beginning in August 2009, Treasury Department has issued monthly reports on the extent to which servicers are offering loan modifications to eligible homeowners under the Home Affordable Modification Program (HAMP). Monthly reports include measures of the quality of the borrower experience and can be found at www.financialstability.gov under 'Reports and Documents'.