Track the Stimulus

• Major expansion to HAMP and FHA-HAMP plans.  The Treasury Department unveiled a list of significant changes to the existing programs.  The changes include:
• Unemployed homeowners are now eligible to make reduce payments on their mortgages for a period of 3 to 6 months;
• New requirements and incentives have been added to favor a reduction in the principal amount of mortgages of borrowers in default over only a reduction on interest payments and extension on the mortgage maturity;
• FHA loans are now eligible for HAMP style modifications (though they are still not eligible for the principal reduction aspects of it);
• Underwater borrowers (those for whom the unpaid value of the mortgage is greater than the market value of the home) in good standing could be eligible to have their principal reduced and the loan converted to an FHA loan to provide them with equity and avoid their "walking away" from the property;
• Incentives have been increased to entice servicers and lenders to approve short sales (the sale of the property at a lower value than the mortgage with the agreement that the lender will consider the loan as fully paid after the sale).

• HUD releases September housing scorecard including an update of Home Affordable Modification Plan statistics.  The data shows improvement over the last few months:  
• One hundred ten (110) servicers including five largest have signed up for the housing plan - loans serviced by these companies combined with those owned by Fannie Mae and Freddie Mac represent 89% of the market.
• As of the end of August 2010, 1.3 million 940,000 trial modifications have started and 468,000 have become permanent modifications.
  
• There were 512,000 FHA loss mitigation interventions.
• The Hope Now program has helped 1.56 million homeowners modified their loans.
• Further assistance for unemployed homeowners
• The Treasury Department announced that it will invest $2 billion to help unemployed homeowners pay for their mortgages for a period of up to 24 months.  The investment will be made through the existing Housing Finance Agency (HFA) Innovation Fund  for the Hardest Hit Housing Markets.  Seventeen states plus the District of Columbia will receive the funds to assist local homeowners pay their mortgages while they find new employment.
• An additional $1 billion will be made available to unemployed homeowners in areas other than the Hardest Hit Housing Markets through the Department of Housing and Urban Development (HUD)'s Emergency Homeowner's Loan Program.
  

The Housing Plan
The Homeowner Affordability and Stability Plan (HASP) aka the Making Home Affordable Plan (MHAP) is the government's solution to stabilize the housing markets.  The Obama housing plan is supported by the following programs:

• Home Affordable Refinance - Access to low-cost refinancing: to provide aid to qualifying homeowners so that they can access low-cost refinancing, the Obama's housing plan makes it possible for individuals to refinance their mortgages even if the equity in their property has fallen below "conforming loan" standards:

The HASP helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20%) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 4.99% as of 3/25/10).  Go to "Mortgage Refinancing Plan" for more details.

• Home Affordable Modification Plan (HAMP) - Homeowner stability initiative: The housing plan calls for the government to invest $75 billion to provide incentives to mortgage lenders and qualifying homeowners to modify the terms of their loans through term-interest rate reduction (lower interest payments on their mortgages and longer periods of repayment) or principal reductions:

The Obama housing plan sets aside the $75 billion to help "responsible" homeowners avoid foreclosure.  Who will these money help?  In general, homeowners that are struggling (or are likely to struggle in the near future) to make their mortgage payments either because of a change in their situation (e.g. loss of income), or because the terms of their mortgages called for much higher monthly payments after an introductory period, as it was rather common in the sub-prime mortgage market.  Go to "Mortgage Modification Plan" for more details on the plan and its qualification requirements.

• FHA - Home Affordable Modification Plan (FHA-HAMP): Homeowners who have Federal Housing Authority (FHA) insured loans are able to take advantage of the HAMP and modify their loans if they are 1 or more months late/delinquent in their payments.  Go to "FHA-Home Affordable Modification Plan" page for details of the plan. 

• Home Equity Loan Modification (Second Lien Program) - Making Home Affordable: the housing plan was augmented to expedite modifications of first mortgages and to make it possible for homeowners that have home equity loans or other second liens on their properties to stay in their houses.  The HASP offers a Second Lien program that provides incentives for services to modify or extinguish second liens once a first mortgage has been modified:
  

The government estimates that approximately 50% of all homeowners eligible for the housing plan's mortgage modification program have second liens (1 to 1.5 million).  By introducing incentives to modify those loans, the program is expected to help those homeowners reduce their payments even further, and to improve the chances that the mortgage modification program would work.  Go to "Home Equity Loan Modification" for more details.

• Keeping Mortgage Rates Low: To maintain mortgage rates at historical low levels the housing plan calls for recapitalizing Fannie Mae and Freddie Mac with another $200 billion, and increase their ability to purchase conforming loans.  The HASP's goal of reducing mortgage rates is actively supported by the Federal Reserve through the purchase of conforming loan securities in the secondary markets:

The Obama housing plan is providing $100 billion in capital to Fannie and Freddie each through the Treasury, in the form of preferred stock.  Furthermore, the portfolio size of the two GSE's (Government Sponsored Enterprise aka Freddie Mac and Fannie Mae) will be increased by $50 billion to $900 billion.  In addition, the Federal Reserve has committed to buying $300 billion in long-dated treasury securities with the intent of keeping interest rates low - an effort that is succeeding.

Homebuyer Tax Incentive (Expired as of June 2010)

It is worth pointing out that the stimulus plan (the ARRA) also provide its own housing plan incentive in the form of a $8,000 tax credit for first-time homebuyers.  In November 2009, a $6,500 tax credit was extended to existing homeowners as well.  The tax incentives expire on June 2010, but a binding purchase agreement needs to have been signed by April 30, 2010.  To enable homebuyers to have rapid acces to the tax credit, the Federal Housing Authority (FHA) makes the $8,000 available immediately to home buyers to be used as down-payment for the purchase of a home with loans backed by the agency.  The money would come from short-term loans provided by approved lenders, and state and local governments, and will be repaid once the buyer receives the tax-credit from the federal government.  Check the "Homebuyer Tax Incentive" page for more details.   

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