Administration Unveils Additional Homeowner Relief

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The administration is seeking to mitigate the foreclosure crisis by helping three to four million homeowners through the end of 2012 who are struggling with mortgage payments. Changes to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs, announced March 26, 2010, are targeted at homeowners facing either unemployment or large declines in the value of their homes.

The program is being funded in part through the $50 billion Troubled Asset Relief Program (TARP) housing relief allocation, as well as the private sector.

The White House noted that mortgage servicers were slow to implement HAMP, and the new adjustments are expected to improve its performance by helping a targeted group of borrowers. The changes will provide temporary mortgage assistance to some unemployed homeowners, encourage servicers to write-down mortgage debt as part of a HAMP modification, allow more borrowers to qualify for modification through HAMP, and help borrowers move to more affordable housing when modification is not possible.

The program will require servicers to provide a minimum of three months, and up to six months for some borrowers, of temporary forbearance for eligible unemployed borrowers, during which their payments will be reduced to no more than 31 percent of their monthly income.

Changes to the FHA program involve providing more opportunities for qualifying mortgage loans to be responsibly restructured and refinanced into FHA loans as long as the borrower is current on the mortgage and the lender reduces the amount owed on the original loan by at least 10 percent. The new FHA loan must have a balance less than the current value of the home, and total mortgage debt for the borrower after the refinancing, including both first and any other mortgages, cannot be greater than 115 percent of the current value of the home.