The administration unveiled major expansions to its foreclosure prevention plan Friday – expansions designed to help underwater and unemployed homeowners and push it closer to meeting President Obama’s goal of helping 3 to 4 million borrowers save their homes.
Treasury Assistant Secretary Herbert M. Allison pointed out “nature of this housing crisis has changed over the past year,” from a subprime crisis to problems stemming from unemployment and negative equity. Allison says these new program adjustments will give mortgage servicers and originators the flexibility they need to assist “responsible homeowners who have been affected by the economic crisis through no fault of their own.” Faith Schwartz, executive director of the HOPE NOW industry alliance, called the announcement “an important step forward for homeowners, who will now have more options to retain homeownership.” According to ABC News, to qualify for this program, out-of-work homeowners must be eligible for HAMP and be receiving unemployment benefits. The monthly payment would be no more than 30 percent of the homeowner’s unemployment benefits.
To expand the use of principal write-downs as part of the Home Affordable Modification Program (HAMP), participating servicers will be required to consider an “Alternative Modification Waterfall” in their evaluations, which includes writing down some principal for loans that are over 115 percent of the current value of the property (LTV). This alternative modification approach will include incentive payments for each dollar of principal write-down by servicers and investors.
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