Web site: makinghomeaffordable.gov
March 4
NeighborWorks News Release:
NeighborWorks America Offers Full Support to the Obama Administration’s Efforts to Combat Foreclosure; Nonprofit Foreclosure Counseling Continues to be Essential
Treasury Department News Release: Relief for Responsible Homeowners One Step Closer Under New Treasury Guidelines
CNNMoney.com: President Obama announces
details of $75 billion loan modification and refinancing programs
CNN.com: Obama to test home loan do-overs
CNN Video: Who Qualifies for Housing Help?
Business Week: Homeowner Stability Plan Begins
February 18
View News Release:
NeighborWorks America Applauds the Obama Administration’s Efforts to Combat Foreclosure
President Obama Announces Homeowner Affordability and Stability Plan
In what is clearly viewed as the most significant step to date to avoid preventable foreclosures, President Obama today announced “The Homeowner Affordability and Stability Plan” — a new program which is expected to stem the rising tide of foreclosures and help up to nine million homeowners by reducing their monthly mortgage payments.
The plan would:
- Allow up to five million individuals to refinance their mortgages through Fannie Mae and Freddie Mac.
- Would provide up to $75 billion from the TARP/bailout fund to help three to four million additional homeowners modify their current loans to a more affordable monthly payment level. These funds would be used to subsidize rates, so that the servicer can reduce monthly payments on the current mortgage.
- Reduce overall mortgage interest rates by providing an additional federal infusion of capital to Fannie Mae and Freddie Mac.
President Obama said:
“In the past, if you found yourself in a situation like this, you could have sold your home and bought a smaller one with more affordable payments, or you could have refinanced your home at a lower rate. But today, home values have fallen so sharply that even if you made a large down payment, the current value of your mortgage may still be higher than the current value of your house. So no bank will return your calls, and no sale will return your investment.”
The plan will require any financial institution accepting capital from the second half of the TARP funds to implement the loan modification guidelines of this plan.
Under the terms of the plan, a lender must reduce the monthly mortgage payment to 38 percent of a borrower’s monthly income. Government funds would then kick-in to cover the cost of further reducing the loan payment down to 31 percent of monthly income.
The modifications won’t just be available to homeowners on the verge of foreclosure. Treasury will provide an incentive payment of $500 to servicers if they modify at-risk loans before a borrower falls behind. Mortgage holders would be paid an incentive of $1,500.
The plan will also provide $1.5 billion in relocation assistance to renters coming off of a foreclosure and the previously announced $2 billion in Neighborhood Stabilization Funds, to improve vacant/foreclosed homes which are negatively affecting neighborhoods and dragging down home prices.
President Obama said, the plan “will give millions of families resigned to financial ruin a chance to rebuild...It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
The Administration also plans to pursue reform of the bankruptcy laws, allowing judges to restructure exiting mortgage debt as part of bankruptcy — often referred to as “cramdown”. Such reforms have been strongly opposed by the financial industry.
