Making Home Affordable
The Obama Administration has 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. Making Home Affordable includes two key programs: the Home Affordable Refinance Program and the Home Affordable Modification Program. Click here for more information on entire plan.
Fannie Mae and Freddie Mac Loan Lookup Tools
As more borrowers become familiar with the Making Home Affordable program, there has been an increase in borrower inquiries regarding the identity of their mortgage investor. To help borrowers answer this question, Fannie Mae and Freddie Mac have launched lookup tools for borrowers.
The Lookup Tools enable mortgage borrowers to quickly determine if Fannie Mae or Freddie Mac own their loan by providing a street address, unit, city, state, and ZIP code. These new tools replace the existing inquiry feature and provide immediate answers indicating whether or not Fannie Mae or Freddie Mac are the investors on the loan at a specific address. Borrowers only need to enter their address information to get a result.
Borrowers can visit Fannie Mae's Web site, fanniemae.com, or Freddie Mac's Web site, freddiemac.com, to use the new lookup tools. Alternatively, with the borrower's consent, you may utilize these tools to quickly determine the mortgage investor for the borrower.
Bank of America/Countrywide's National Homeownership Retention Program
In October 2008, Bank of America announced a home retention program that will provide an estimated $8.4 billion in permanent payment reductions to help an estimated 400,000 Countrywide customers nationwide.
The Countrywide National Homeownership Retention Program was developed in cooperation with state Attorneys General to provide affordable and sustainable mortgage payments for troubled Countrywide borrowers who financed their homes with subprime or pay option adjustable rate mortgages and, among other criteria, are 60 days or more delinquent. The program also makes available up to $150 million in foreclosure relief and $70 million in relocation costs for eligible customers in participating states.
To date 19 states are participating in this program including Alaska, Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Kansas, Michigan, Mississippi, Nevada, North Carolina, Ohio, Pennsylvania, Texas, Virginia, Washington and West Virginia.
This program builds on previous industry-leading commitments Bank of America has made to help customers sustain homeownership. Taken together, Bank of America is committed to keeping 630,000 borrowers in their homes, representing over $100 billion in mortgages.
Mortgage Relief Fund
On December 12, 2007 Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America announced that they have committed $125 million in funds to create the Mortgage Relief Fund. This Fund is aimed at helping New England homeowners who are in good standing with their current mortgage loan(s), but who may be experiencing difficulty making payments now and who expect to have greater difficulty making payments when their rates reset. Through the program, borrowers will have access to a range of mortgage products that may include FHA and FHA Secure as well as state programs and other programs offered by the five participating banks.
Homeowners are eligible if:
- the house is worth more than the total of the mortgage loan balance(s)
- the homeowner has generally made mortgage payments on time
- the property is owner-occupied; and
- borrowers can document their current income
More information can be found at www.mortgagerelieffund.com.
This is a temporary program launched September 2007 to help non-FHA subprime ARM borrowers refinance into fixed rate loans. In addition, if they can afford it, borrowers may be able to roll post re-set arrearages into the new mortgage. Loan applications must be submitted by 12/31/2008. Currently eligibility is limited to borrowers who are current on their ARMs or didn't become delinquent until after the reset of their mortgage. The loan limits enacted in mid-February 2008 will apply to mortgages approved by December 31, 2008. (The new limits are at https://entp.hud.gov/idapp/html/hicostlook.cfm).
Critics believe the current eligibility requirements mean FHA Secure will only be able to help about 5% of all delinquent borrowers (as of mid-February, HUD reported that it had helped 1,467 nationwide). A major subprime industry group (ASF) has urged HUD to expand eligibility to all delinquent borrowers, including those with fixed rate mortgages and those who fell behind before their rate reset and HUD is reportedly considering this. ASF says this change could assist about 607,000 subprime borrowers who are two or more months behind (about two-thirds of all such borrowers).
Currently, FHA Secure is limited to borrowers who:
- have a history of 100% same-month mortgage and other regular debt payments 6 months prior to re-set (and has been on-time under any forbearance agreements)
- have a loan that has or will re-set between June 2005 and December 2008
- have 3% cash or equity in home (maximum loan to value is 97.65% or 97.15%)
- have a sustained history of employment and sufficient income to make mortgage payments (lenders are encouraged to use automated 31% and 43% ratios but can consider compensating factors if ratios exceeded).
If the new FHA Secure loan is not enough to pay off the current mortgage, the lender may execute a second lien at closing to pay off the difference. The combined total of the FHA Secure loan and the second lien can exceed FHA loan limits but the FHA lender must consider any payments required on the second lien when calculating 31% payment-to income ratio and 43% debt-to-income ratios. Second liens that require no payments for first 3 years are not considered in calculating these ratios.
For information, applicants can either call 1-800-CALL-FHA (1-800-225-5342) or contact an FHA-approved lender – information is available online.
Hope for Homeowners (FHA)
On July 30, 2008, President Bush signed into law legislation that will allow HUD's Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA's existing efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program will be implemented on October 1, 2008.
Some of the eligibility criteria will be:
- the property must be owner-occupied;
- the mortgage must have originated on or before January 1, 2008;
- the household mortgage debt-to-income must be at least 31 percent;
- the household cannot afford their current loan;
- the household did not intentionally miss mortgage payments; and
- the household does not own a second homes.
Features of FHA-insured loans under the new program include:
- 30-year, fixed rate mortgage;
- Maximum 90 percent loan-to-value ratio;
- No prepayment penalties;
- $550,440 maximum mortgage amount;
- Extinguishment of any subordinate liens; and
- New home appraisals from FHA-approved appraisers.
On January 7, 2009 the Board of Directors of the Home for Homeowners (H4H) program published an interim rule in the Federal Register intended to boost program use. The rule was effective immediately, with comments due by March 9, 2009.
The new rule addresses some barriers by allowing more flexible underwriting, with higher loan to value ratios and longer mortgage terms allowed (up to 40 years), and extends eligibility to 2-4 units owner-occupied properties. It also addresses the challenge of second liens.
Under H4H, holders of subordinate liens (e.g. second mortgages) must release their lien and until now were only offered a share of potential future appreciation in exchange. The new rule allows lien holders to choose between an upfront payment of 3% or 4% of the outstanding principal (depending on the combined loan to value ratio) or future appreciation of 9% or 12% of the outstanding principal and interest. It also revises the appreciation calculation to tie it to appraised value and to exclude pre-existing equity.
On April 29, 2009, the Obama Administration announced steps to incorporate Hope for Homeowners into Making Home Affordable. Under the changes, when evaluating borrowers for a Home Affordable Modification (HAMP), servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where HFH proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for HFH refinancings similar to those offered for HAMP.
More information can be found on HUD's website.
Home Saver Advance (Fannie Mae)
This program is just starting (it was announced February 27, 2008). It is limited to arrearages on loans that Fannie Mae has purchased or securitized and is expected to be available via all Fannie Mae servicers by 4/15/2008. It can be used on all types of mortgage loans (prime, subprime) and all types of 1-4 unit properties (principal residence, second home, investment property). It offers one time unsecured loans of up of to the lesser of $15,000 or 15% of their original unpaid principal balance to borrowers who are 2-6 months behind on their mortgage payments (PITI). Borrowers must demonstrate that the problems that led to the delinquency have been resolved and that they can repay the loan. The loans are fixed-rate (5%), 15 year loans with no payments due for the first six months.
Funds can be used for a variety of arrearages, including homeowner association fees, and go directly to reduce this debts (no funds go directly to the borrower). Servicers will receive a $600 workout fee. Because it is a personal loan, it is not subject to LTV or property value restrictions. Servicers can combine this program with other foreclosure prevention options, including repayment plans, loan modifications, short sales, and deeds-in-lieu. Information is available from Fannie Mae at 1-888-326-6438, option #2 or on Fannie Mae's website.