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The Homeowner Affordability and Stability Plan (HASP) aka the Making Home Affordable Plan (MHAP) is the government's solution to stabilize the housing markets. The Obama housing plan is supported by the following programs:
- Home Affordable Refinance - Access to low-cost refinancing:to provide aid to qualifying homeowners so that they can access low-cost refinancing, the Obama's housing plan makes it possible for individuals to refinance their mortgages even if the equity in their property has fallen below "conforming loan" standards:
The HASP helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20%) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 5.36% as of 7/15/09).
- Home Affordable Modification Plan (HAMP) - Homeowner stability initiative: HAMP ; The housing plan calls for the government to invest $75 billion to provide incentives to mortgage lenders and qualifying homeowners to modify the terms of their loans through term-interest rate reduction (lower interest payments on their mortgages and longer periods of repayment) or principal reductions:
The Obama housing plan sets aside the $75 billion to help "responsible" homeowners avoid foreclosure. Who will these money help? In general, homeowners that are struggling (or are likely to struggle in the near future) to make their mortgage payments either because of a change in their situation (e.g. loss of income), or because the terms of their mortgages called for much higher monthly payments after an introductory period, as it was rather common in the sub-prime mortgage market. .
- FHA - Home Affordable Modification Plan (FHA-HAMP): Homeowners who have Federal Housing Authority (FHA) insured loans are able to take advantage of the HAMP and modify their loans if they are 1 or more months late/delinquent in their payments. Go to "FHA-Home Affordable Modification Plan" page for details of the plan.
- Home Equity Loan Modification (Second Lien Program) - Making Home Affordable: the housing plan was augmented to expedite modifications of first mortgages and to make it possible for homeowners that have home equity loans or other second liens on their properties to stay in their houses. The HASP offers a Second Lien program that provides incentives for services to modify or extinguish second liens once a first mortgage has been modified:
The government estimates that approximately 50% of all homeowners eligible for the housing plan's mortgage modification program have second liens (1 to 1.5 million). By introducing incentives to modify those loans, the program is expected to help those homeowners reduce their payments even further, and to improve the chances that the mortgage modification program would work.
- Keeping Mortgage Rates Low: To maintain mortgage rates at historical low levels the housing plan calls for recapitalizing Fannie Mae and Freddie Mac with another $200 billion, and increase their ability to purchase conforming loans. The HASP's goal of reducing mortgage rates is actively supported by the Federal Reserve through the purchase of conforming loan securities in the secondary markets:
The Obama housing plan is providing $100 billion in capital to Fannie and Freddie each through the Treasury, in the form of preferred stock. Furthermore, the portfolio size of the two GSE's (Government Sponsored Enterprise aka Freddie Mac and Fannie Mae) will be increased by $50 billion to $900 billion. In addition, the Federal Reserve has committed to buying $300 billion in long-dated treasury securities with the intent of keeping interest rates low - an effort that is succeeding.
LOWER YOUR PAYMENTS WITHOUT REFINANCING
A modification package prepared by the U.S. Financial Relief Center will assist you in lowering your mortgage payment by decreasing your interest rate, extending the terms of your loan, having delinquent payments applied to the back-end of the loan, forbearance of principal and in some cases, even a permanant reduction of principal.
Our modification packages are prepared for success. Each package contains a "win/win" proposal clearly showing the benefit of modification for you and your lender, a monthly financial breakdown of your current income and expenses, showing exacly how your hardship affected your financial situation, and a custom hardship letter written in terms your lender can understand.
An achievable modification is obtained by ensuring you qualify for assistance. After qualification comes verification of your hardship and current finances thru a modification package. Your package has to be complete and perfect in every way. If not you will not be successful. Thousands of homeowners are applying for assistance daily. You have one chance at this. It is crucial that you obtain the assistance needed to stay in your home.
NEW PROGRAMS HAVE RECENTLY BECOME AVAILABLE!
The Making Home Affordable Modification Plan, released March 4, 2009 was implemented to help 3-4 MILLION struggling homeowners obtain an affordable mortgage payment through a combination of interest rate reductions, extending of loan terms to up to 40 years and at the discretion of the lender, forebear a portion of the principal balance to attain a mortgage payment of 31% of your gross monthly income. Contact us today to learn more about this exciting new program!
AVOID FORECLOSURE AND PRESERVE YOUR CREDIT STANDING
Your home is your most important asset. A Loan Modification will bring you current on your mortgage and has no negative impact on your credit standing.
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Making Home Affordable will offer assistance to
as many as 7 to 9 million homeowners, making their mortgages more affordable and helping to prevent the destructive impact of foreclosures on families, communities and the national economy.
The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.
GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.
The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.
With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that
at-risk borrowers can better afford their payments. The detailed guidelines
(separate document) provide information on the following:
Eligibility and Verification
Loans originated on or before January 1, 2009.
First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
Modifications can start from now until December 31, 2012; loans can be modified only once under the program.
Loan Modification Terms and Procedures
Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.
Participating loan servicers will be required to use a net present value
(NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive, meaning that the net present value of expected cash flow is greater in the modification scenario, the servicer must modify absent fraud or a contract prohibition.
Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and re default rate assumptions.
Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).
The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.
The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.
Servicers must enter into the program agreements with Treasury's financial agent on or before December 31, 2009.
Payments to Servicers, Lenders, and Responsible Borrowers
The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.
Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.
Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.
The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.
The program will include incentives for extinguishing second liens on loans modified under this program.
No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.
Similar incentives will be paid for Hope for Homeowner refinances.
Transparency and Accountability
Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.
Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.
Freddie Mac will audit compliance.
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