Learn About the Making Home Affordable Refinance and
Modification Options
America's Making Home Affordable Program Logo
The President's plan was created to help millions of
homeowners refinance or modify their mortgages.
SUMMARY OF GUIDELINES <---- LINK
U.S. DEPARTMENT OF THE TREASURY
Washington
March 4, 2009
Making Home Affordable
Summary of Guidelines
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 redefault 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.
Refinancing: Many homeowners pay their mortgages on time but
are not able to refinance to take advantage of today's lower mortgage rates
perhaps due to a decrease in the value of their home. A Home Affordable
Refinance will help borrowers whose loans are held by Fannie Mae or Freddie Mac
refinance into a more affordable mortgage.
Modification: Many homeowners are struggling to make their
monthly mortgage payments either because their interest rate has increased or
they have less income. A Home Affordable Modification will provide them with
mortgage payments they can afford.
Who is Eligible?
Please use the self-assessment tools provided on this
website to see if you are among the 7 to 9 million homeowners who can benefit
from Making Home Affordable. Based on your results, we will provide suggestions
about what you can do next.
FIND OUT IF YOU ARE ELIGIBLE
* Borrower Q&A PDF Document
Beware of Foreclosure Rescue Scams - Help Is Free!
* There is never a
fee to get assistance or information about Making Home Affordable from your
lender or a HUD-approved housing counselor.
* Beware of any
person or organization that asks you to pay a fee in exchange for housing
counseling services or modification of a delinquent loan. Do not pay - walk
away!
* Beware of anyone
who says they can "save" your home if you sign or transfer over the deed to
your house. Do not sign over the deed to your property to any organization or
individual unless you are working directly with your mortgage company to
forgive your debt.
*
Never make your mortgage payments to anyone other than your mortgage company
without their approval