Donovan, Geithner, Outline New Details Behind Making Home Affordable Program

Posted under Industry News on May 14, 2009

Revised from MakingHomeAffordable.gov.

Treasury Secretary Tim Geithner and Housing and Urban Development (HUD) Secretary Shaun Donovan today provided an update on the Making Home Affordable program’s impact on stemming the housing crisis and keeping families in their homes and announced new options for homeowners facing foreclosure. The announcement and update came following a meeting with housing counselors from the National Community Reinvestment Coalition.

The new details on the Making Home Affordable program include:

  • Foreclosure Alternatives that provide incentives for servicers and borrowers to pursue short sales and deeds-in-lieu (DIL) of foreclosure in cases where the borrower is generally eligible for a MHA modification but does not qualify or is unable to complete the process, which helps prevent costly foreclosures and minimizes the damage that foreclosures impose on borrowers, financial institutions and communities. The new details 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. The program provides a standard process flow, minimum performance timeframes and standard documentation, and it offers financial incentives to servicers and borrowers to pursue these alternatives to foreclosure.
  • Home Price Decline Protection Incentives that will provide lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPD P payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

Since the launch of Making Home Affordable, more than one million Americans have now refinanced, due to historically low interest rates, and thousands of underwater borrowers have refinanced under the Home Affordable Refinance Program. 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 percent and 105 percent. More than 55,000 Home Affordable Modification offers have been extended to qualifying borrowers. Additionally, servicers have mailed more than 300,000 letters to homeowners who are potential candidates for the program. The refinance application volumes and modifications underway make clear the desire of homeowners to take advantage of the administrations program.