Making Home Affordable Plan - Modifications

Services for Real Estate Pros with The Law Office of Peter J. Goodman

On Feb.18th the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures.

As promised, two weeks later on March 4th, the Administration published detailed program guidelines and authorized servicers to begin modifications and refinancings under the plan immediately.  On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA.  Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.  

Today, the Law Office of Peter J. Goodman is providing a program update on Home Price Decline Protection Incentives.  Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities. 

The hope is, together with the other comprehensive elements of the Making Home Affordable program, property values will be stabilized for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.   

 Home Price Decline Protection Incentives to Protect Against Falling Home Prices:

This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset. 

To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan.  Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed.  HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.  

How The Program Works:


•• Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.

•• Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.

•• If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months.  HPDP incentive payments will be made at the end of the first and second year of the modification.

 Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating: 

•• Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and

•• The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas.  


For more updates on the Making Home Affordable Plan - or any other real estate legal matters - please contact us at


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