by Broderick Perkins
(1/30/2012) - It may be impossible to reach every struggling homeowner, but the Obama Administration's upgrades to Making Home Affordable programs should increase the number of homeowners who need help.
For the housing market, President Obama is at least living up to his "We can't wait" theme voiced in his recent state of the union speech.
Hot on the heels of improvements in the Home Affordable Refinance Program (HARP), the administration also expanded the reach of the troubled Home Affordable Modification Program (HAMP).
The two-pronged Making Home Affordable initiative includes a refinance approach to saving homeownership, HARP and HAMP, the mortgage modification prong, the latest to get an upgrade.
A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable, according to a helpful and inexpensive resource, Silver Spring, MD-based mortgage expert Peter Miller's "The Quick & Dirty Guide To Successful Mortgage Modifications" (Silver Spring Press, $2.99).
To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches.
Short of the several million homeowners it was originally designed to help, HAMP has helped only 900,000 families since 2009, saving them about $500 every month, but the HOPE NOW private mortgage industry alliance claims it has generated an additional 4 million modifications since 2007.
"Hope Now is pleased that the Administration has ... decided that expanding it to reach more homeowners and extending it for another year is the appropriate course of action. HAMP has not only helped nearly a million distressed homeowners nationwide, it has established a standardized process for allowing mortgage servicers to determine the proper solution for each individual case, whether it be a HAMP modification, proprietary modification or short term solution," said HOPE NOW executive director Faith Schwartz.
Under HAMP guidelines to help more homeowners:
• The program will be extended through Dec. 31, 2013, an extension of one year.
• Homeowners with second mortgages will be eligible for a special evaluation with higher, more flexible debt-to-income ratios.
• Rental properties, currently occupied or vacant, will be considered for a HAMP modification. That's a relief for both landlord/property owners previously ineligible for HAMP and renters previously threatened with the boot to make the property owner-occupied and eligible for HAMP.
• To encourage more investors holding mortgage securities to offer principal reductions in HAMP modifications, the program will triple incentives paid to investors from 18 to as much as 63 cents on the dollar, depending upon how much the principal reduction reduces the loan-to-value ratio.
• To offer more HAMPs with principal reduction, the program will now include Fannie Mae and Freddie Mac loans which don't currently benefit from principal reduction HAMP modifications. The program will also offer cash incentives to Fannie and Freddie if they allow servicers to forgive principal in a HAMP modification.
"There are currently millions of distressed homeowners fighting foreclosures. They are in desperate need of meaningful assistance, both in terms of reliable information about their options and financial relief brought about by mortgage loan modifications..the HAMP eligibility expansions and principal reduction incentives being introduced will undoubtedly help facilitate that outcome for a great many deserving homeowners," said Colleen Hernandez, CEO of the Homeownership Preservation Foundation.
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