President Obama has released details of the $75 billion Homeowner Affordability and Stability Plan, which will provide access to low-cost mortgage refinancing for homeowners hurt by falling home
prices, as well as create an initiative to aid approximately 3 million
to 4 million homeowners at severe risk of losing their homes.
Altogether, the plan
will help up to 7 million to 9 million families restructure or
refinance their mortgages to avoid foreclosure, according to a fact
sheet released by the White House. Speculators will be ineligible for
all components of the initiative.
"The objective of the Homeowner Affordability and Stability Plan
is to provide creditworthy borrowers who have shown a commitment to
paying their mortgage with affordable payments that are sustainable for
the life of the loan," states an official White House blog post.
"Borrowers whose mortgage interest rates are much higher than the
current market rate should see an immediate reduction in their
payments."
Eligible loans for refinancing will include those
where the new first mortgage (including any refinancing costs) will not
exceed 105% of the property's current market value.
Loan
servicers will receive an up-front fee of $1,000 for each eligible
mortgage modification meeting guidelines established under this
initiative. They can also obtain "pay for success" fees – which are
awarded monthly as long as the borrower stays current on the loan – of
up to $1,000 each year for three years.
In addition, to further
encourage loan modifications, the Obama administration, together with
the Federal Deposit Insurance Corp. (FDIC), has developed an partial
guarantee initiative.
The insurance fund – to be created by the
Treasury Department at a size of up to $10 billion – will be designed
to discourage lenders from opting to foreclose on mortgages that could
be viable now out of fear that home
prices will fall even further later on. Holders of mortgages modified
under the program would be provided with an additional insurance
payment on each modified loan, linked to declines in the home price index.
Other important measures outlined in the plan
include new oversight, reporting and performance-monitoring
requirements under guidance of the Treasury, the FDIC, the Federal
Reserve and the Department of Housing and Urban Development; allowing
"judicial modifications of home
mortgages during bankruptcy for homeowners who have run out of
options"; providing $1.5 billion in relocation assistance to renters
forced out by foreclosure; increasing the flexibility of certain
Federal Housing Administration programs; and upping funding commitments
to Fannie Mae and Freddie Mac, as well as increasing the size of the
entities' retained portfolios.
Further information on the plan is available at www.whitehouse.gov
SOURCE: White House |
