Treasury Releases Guidelines for Refinance and Modification
The Treasury today announced the release of Modification Guidelines for the "Homeowner Affordability and Stability Plan." The updated program description details the intended purposes of the plan, as does the updated Executive Summary.
The guidelines identify two types of mortgage assistance for homeowners: the Home Affordable Refinance, intended to assist underwater borrowers seeking to refinance to lower mortgage rates; and the Home Affordable Modification, intended to assist "at-risk" homeowners to modify mortgages. The refinance portion of the plan is designed to work with an improved Hope for Homeowners plan. The guidelines for modification detail eligibility and verification, loan modification terms and procedures, payments to lenders, servicers, and borrowers, and controls for transparency and accountability.
Eligibility highlights for the modification program include:
• Loans originated on or before January 1, 2009.
• First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
• Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
• Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
• Modifications can start from now until December 31, 2012; loans can be modified only once under the program.
In Detail: Homeowner Affordability and Stability Plan
The Treasury released details about the Homeowner Affordability and Stability Plan, including a summary of the proposal to encourage mortgage modification and several illustrations about how the plan is designed to work and answers to potential questions. As outlined, the plan has three stated purposes: (1) to provide low-cost refinancing to homeowners now unable to refinance; (2) to create a $75 billion fund to aid loan modifications for homeowners now underwater on mortgages; and (3) to keep current mortgage rates low by providing additional support for Fannie Mae and Freddie Mac.
Not to be outdone, the White House unveiled its Financial Stability website and posted additional information about the plan on the White House blog.
