Foreclosure Avoidance Programs get Facelift


Three foreclosure prevention initiatives begun
in the early years of the housing crisis will receive updates to better reflect
the changing needs of distressed homeowners and motivate their continued
on-time mortgage payments.  The U.S.
Departments of Treasury and Housing and Urban Development (HUD) announced the
revisions to the three, all of which operate under the joint HUD/Treasury
Making Home Affordable (MHA) program.

“While the housing sector has
strengthened in recent years, there are still many homeowners struggling to
make their mortgage payments,” said Secretary of the Treasury Jacob J. Lew.
“The changes we are announcing today offer meaningful incentives for borrowers
to stay current in their modifications, increase their opportunity to build
equity in their homes, and provide vital safety nets for those facing greater
financial strains.”

The Home Affordable Modification Program
(HAMP), established in 2009, offers homeowners loan modifications with lower monthly
payments achieved through lowered interest rates and modified loan terms.  Many homeowners with HAMP modifications have
been eligible to earn up to $5,000 if they adhere to modification terms for
five years.  The amount is applied to
their outstanding principal balance.

Under the revisions an additional $5,000
will be available to homeowners after a sixth year of on-time payments and they
will then have the opportunity to re-amortize the reduced mortgage balance,
thus further lowering their monthly payment.   HUD/Treasury estimate some one million
borrowers with HAMP modifications may be eligible for the new incentive.  

HAMP Tier 2 was developed as an
alternative for homeowners who can’t qualify or are unable to sustain a HAMP
Tier 1 modifications.  It provides modifications
with a low fixed rate for the life of the loan. 
The revision announced this week will include reducing the interest rate
for these modified loans by 50 basis points which will also make more borrowers
eligible for the program.  It also
extends the sixth year $5,000 pay-for-performance incentive to Tier Two

The Home Affordable Foreclosure
Alternatives (HAFA) program allows homeowners who cannot qualify or sustain a
modification a way to exit homeownership without going through
foreclosure.  This is usually done
through a short sale to a third party or, more rarely, a deed-in-lieu of
foreclosure.  Exiting homeowners are
provided with financial assistance to help them with the expenses of moving and
establishing a new residence.  The
enhancement announced this week will increase the amount of this assistance to
a maximum of $10,000 “to better
reflect increased rents and the cost of moving in many parts of the country.”

“Today’s announcement signals our
commitment to helping more hardworking families continue the American dream of
homeownership,” said Secretary of Housing and Urban Development Julián Castro.
“These enhancements will expand the opportunity for more folks to stay in their
home, stabilizing local communities and continuing our nation’s positive
economic momentum.”

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