The details of the President’s Homeowner Affordability and Stability Plan are to be announced on March 
4th. I have been reviewing the executive summary and fact sheet for the plan which is posted on the White House web site. Click here for your reading enjoyment.
Under the stability section components 2 (B&C) read as follows
2(B) Clear and Consistent Guidelines for Loan Modification
2(C) Requiring All Financial Stability Plan Recipients to Use Guidance for Loan Modifications
Clear and Consistent Guidelines for Loan Modifications
The premise for this component is that mortgage servicers, in some cases, have not common sense loan modifications for fear of incurring lawsuits. The fact there have not been consistent guidelines that pertain to everyone opens the servicers up to litigation based upon the potential disparity of modifications offered.
The FDIC, FHA, the Federal Housing Finance Agency and banking and credit union regulators are to be working with the President Obama’s administration to “bring order and consistency to foreclosure mitigation”.
Fannie Mae and Freddie Mac are to use these loan modification guidelines on all loans they guarantee. All loans owned or guaranteed by the Federal government will apply the same guidelines. This will include loans guaranteed or owned by Ginnie Mae, FHA, the FDIC, Federal Reserve, the Treasury Department, VA and the Department of Agriculture. It is the Administrations intent to apply these loan modification guidelines across the entire mortgage industry.
My opinion: As with most things I can see the pros and cons with this. On one hand it does seem appropriate to have a set guidelines so they can be applied evenly across the board. On the other hand guidelines that are to rigid, can prevent the kind of flexibility that may be needed. There will need to be the ability to deal with exceptions.
An issue that his developing with new loan applications is that underwriters all too often are unwilling to underwrite except under strict application of loan program guidelines. Exceptions are not allowed in cases where it makes sense.
Requiring All Financial Stability Plan Recipients to Use Guidance for Loan Modifications
It’s my way or the highway. Plain and simple and don’t you forget it!
What is your opinion? What have you heard of the loan modification process to this point? What do you see as possible unintended consequences? Is this the change we’ve been looking for?
Next Up
Judicial Modifications
Related Homeowner Affordability and Stability Posts
Part 1
Part 2
Part 2 (a)
What the Fed
Jay Williams
www.myhomeloanwithjay.com
;)
;)
It will be interesting to see. I think we will either end up with guidelines that are once again to rigid so that they will not help anybody much like prior attempts at solving this problem, or guidelines that are too loose so that anybody and everybody can get a loan mod regardless of the need. I am thinking because of the incentives offered it is probably going to be the latter.
Also, note they are only modifying Fannie/Freddie loans. That means anyone with a subprime loan is out of luck.
Michelle