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Obama’s Homeowner Affordability and Stability Plan: A Breakdown Part III

Published on February 28, 2009 in Bankruptcy Act 2009 and Homeowner Affordability & Stability Plan. 0 Comments

Fannie Mae and Freddie Mac Loan Modifications

1. Government will support low mortgage rates for Fannie Mae and Freddie Mac loans so homeowners will gain new access to refinancing and more importantly lower monthly payments.

2. Certain Fannie and Freddie loans either in their portfolios or in mortgage backed securities will be refinanced.  The Administration will provide guidelines by March 4, 2009. These certain loans will include loans where the first mortgage does not exceed 105% of the current market value.  Refinanced loans will be a 15- or 30-year loan with a fixed market rate of interest.

3. Government will continue to purchase Fannie and Freddie backed loans.

Obama’s Homeowner Affordability and Stability Plan: A Breakdown Part II

Published on February 27, 2009 in Bankruptcy Act 2009 and Homeowner Affordability & Stability Plan. 0 Comments

Bankruptcy Modifications

The Administration will continue to influence change in the bankruptcy rules to allow individuals to pay the fair market value under Court order.  Currently, the Administration is in talks with Congress and predicts a swift enactment of the reformed bankruptcy law.  Such reformation includes the following:

  • Debtors’ mortgage loans will be crammed down to the current value of the property (with the remaining balance being treated as unsecured)
  • Bankruptcy Judges will have the power to, “develop an affordable plan for the homeowners to continue making payments”
  • Debtors who have existing mortgages under Fannie Mae and Freddie Mac conforming loan limits must ask their servicers/lenders for a modification first before seeking a modification in bankruptcy.  Also, the debtor requesting the modification must certify that he or she, “complied with reasonable requests from the servicer to provide essential information.”  (The reason behind this requirement is to not allow millionaire homes in bankruptcy.  However the program as worded would require an extra step for non-millionaire homes but not for millionaire homes.)
  • FHA and VA will provide partial claims in the event of bankruptcy or voluntary modification, “so holders of loans guaranteed by the FHA and VA are not disadvantaged”

Obama’s Homeowner Affordability and Stability Plan: A Breakdown Part I

Published on February 26, 2009 in Bankruptcy Act 2009 and Homeowner Affordability & Stability Plan. 0 Comments

Obama’s Homeowner Affordability and Stability Plan attempts to offer assistance to as many a 7 to 9 million homeowners under the three (3) programs.  For the next three days, WWR will provide a breakdown of each of the programs.  The three (3) programs will affect the following:

Part I:  Treasury Partnered Loans
Part II:  Loans in Bankruptcy
Part III:  Holders of Fannie Mae/Freddie Mac Loans

Even if you do not have a loan as described above, it is important to understand the administration’s initiative.  The administration is attempting to regulate the industry by using certain guidelines.  They are working with regulators and federal/state agencies to implement the March 4, 2009 proposed guidelines, “across the entire mortgage market.”

Treasury Partnered Loan Modifications (Did you accept the government’s money)

1.  Who is an eligible debtor under the Treasury Partnered Program?

  • Debtors with a “high combined mortgage debt compared to income;”
  • Debtors who have property “underwater;”
  • Debtors who are current with their mortgage but are at risk of “imminent default;”
  • Debtors who occupy the home; or
  • Debtors that have mortgage up to the “Freddie/Fannie conforming limits”

Further, any debtors that are eligible must agree to enter into a consumer debt counseling (HUD-certified) if their total debt is equal to 55% or more of their income.

2.  What will the Lenders have to do?

  • The lender will reduce the interest rates to a “specified affordability level” (mortgage payment is no greater than 38% of debtors’ income)
  • The initiative will match (dollar-for-dollar) further reduction in interest payments (down to 31% DTI).
  • Lender will keep the modified payments in place for five years
  • Lender can bring down the monthly payments to the target level by reducing the mortgage principal

3.  What are the incentives for Lenders and/or Servicers?

  • Servicers will receive $1,000 for each modified loan and as much as $1,000 for three years if the borrower remains current
  • Mortgage lenders will also be given incentives for modifying loans for “at risk” borrowers. Sevicers will receive $500 while loan holders will receive $1,500 to modify loans
  • To prevent foreclosures, mortgage holders modified under the program would be provided with “additional insurance payment on each modified loan, linked to declines in the home price index”

4.  What is the incentive for the Debtor?

  • Lower monthly payments
  • Homeowners will be able to receive up to $5,000 remaining current on their loans for five years

5.  What other requirements are for servicers?

  • Any servicer participating in the program will be required, “to report standardized loan-level data on modifications, borrower and property characteristics, and outcomes”

6.  What are the alternatives to modification?

  • Lenders will receive incentives for avoiding foreclosure, i.e. short sales, and Deed-in-Lieu of foreclosure if modifications do not work