The Obama Administration revealed on Friday a new plan to stem foreclosure. Assistant Secretary of the Treasury Herbert M. Allison contends that the nature of the foreclosure crisis has shifted from one of sub-prime mortgages to one of helping the unemployed and under-water to survive bad times.
For loans above 115% of market value mortgage write-downs will be considered in order to bring the homeowner’s payment to 31% of income. In response to concerns that the mortgage write-down program would encourage people to default who might have otherwise continued to pay, the government has held firm that this program will impact only a small fraction of homeowners with mortgages that are under water. Further, they believe that it will be popular with mortgage investors who are interested in stronger long-term performance of these assets.
FHA will also play a larger role in refinancing under water mortgages because lenders will have the option of using FHA’s federally insured mortgage program to underwrite the loan. Lenders must write down the loan at least 10% to 97.75 LTV. Second mortgage holders must agree to writing down the loan in order for the whole loan to stay within 115% of market value.
For unemployed homeowners mortgage holders must provide 3-6 months of forbearance before restarting payments. To qualify, the unemployed homeowner must live in the home, must request the temporary hold on payments within the first 90 days of becoming delinquent, and must not owe more than $729,000. A HAMP modification will be considered following the forbearance period, and if the homeowner has not been re-employed they will be considered for a Deed in Lieu of Foreclosure or a Short Sale.
Incentives for lenders to participate in HAFA Short Sales and Deeds in Lieu of Foreclosure have been increased from $1000 per instance to $1500, and relocation help for homeowners in the HAFA program have increased from $1500 to $3000.
Dave Rosenmarkle
Broker/Owner
Highland Realty
Arlington, VA 22207
703-538-2566
davidrose@mris.com
www.HighlandAgents.com
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