On May 14, 2009, the Treasury and the Department of Housing and Urban Development announced updates to the Making Home Affordable Program. These updates detail Foreclosure Alternatives Incentives and Home Price Decline Protection Incentives.
Foreclosure Alternative Program. The Foreclosure Alternative Program provides incentives to mortgage servicers to pursue short sales of homes or deeds in lieu of foreclosure. In either case, the incentives are aimed at helping homeowners who can no longer afford to stay in their homes by allowing them to avoid foreclosure and relocate to a home that they can afford.
The updates indicate that homeowners who satisfied the minimum eligibility requirements for a modification under the Program but who could not qualify for a modification will be eligible for the Foreclosure Alternative Program. For example, a homeowner may meet all eligibility requirements yet the servicer determined that the borrower would not be able make payments on a loan as modified under the Program; in this case, the homeowner may be eligible for the foreclosure alternative. Further, homeowners who received a modification but who were unable to sustain payments under that modification will be eligible for the Foreclosure Alternative Program.
Servicers will be required to determine if a short sale is appropriate, and if so, a completed short sale will result in the servicer receiving up to $1,000 and in the homeowner receiving $1,500 to assist with relocation expenses. The servicer must allow the homeowner at least 90 days to sell the property, and the property must be listed with a licensed, experienced realtor. If a short sale does not result, then the servicer may accept a deed in lieu of foreclosure, which would entitle the homeowner to $1,500 to assist with relocation expenses.
Home Price Decline Protection Program. The Home Price Decline Protection Program is designed to encourage additional modifications by ensuring that certain investor losses will be at least partially offset, especially for homes located in markets that have been the hardest hit by falling home prices. This Program provides additional monetary incentives for each modified loan, and the amount of the incentive will be linked to the rate of recent home price decline in local housing markets. Thus, the greater the decline in housing prices in a housing market, the greater the potential additional incentive payment under this Program. These incentive payments are capped at a total of $10 billion.
Progress Report. The Treasury also posted a Progress Report on the Making Home Affordable Program. This Report indicates that based on the servicers who have signed-up for the Program, 75% of all loans in the United States are now covered by the Program. The servicers have extended modification offers to over 55,000 homeowners and have mailed-out over 300,000 letters to potentially eligible borrowers. In addition, Fannie Mae and Freddie Mac have acquired thousands of refinanced mortgages for high loan-to-value borrowers under the Refinance Program.