Whitehouse Unveils Home Mortgage Assistance Program
Well, the day has finally come for the government to unveil the details of its home assistance mortgage program, aimed at helping up to 9 million homeowners to stay in their homes and avoid foreclosure. Overall, it is targeted to provide subsidized payment to lenders and mortgage servicers in exchange for a modified home loan for borrowers that qualify for the plan.
One to four unit primary residence homes will qualify under the plan, but investment properties are excluded.
The Treasury will partner with lenders to reduce monthly mortgage payments to a 31% front end dti (new principle, interest, taxes and insurance payment divided by individual’s gross monthly income). There is no restriction on the back end dti (which includes PITI plus all other credit items), but those that come in at 55% or over will be required to work with a HUD approved counselor.
Loan servicers will receive an upfront incentive payment of $1,000, and an additional $1,000 yearly payment for three years, as long as the borrower stays with the modified loan program. Borrowers will receive a pay-for-performance success payment up to $1,000 for five years (as long as all monthly payments are made on time) that will go directly to reducing principal. Also, a one-time bonus incentive payment of $1,500 for lenders and $500 for servicers, will be paid for loan modifications done for borrowers that are current on their home mortgage. No modification charges or fees will be borne by the borrower.
Lenders will only be compensated when the front end dti of 31% is achieved. The Treasury will pay half of the difference between the monthly payment reduction from 38% dti to 31% dti.
Will this be enough incentive for lenders to modify loans for those that cannot, or are having difficulty making their monthly mortgage payments? The incentives will most likely help, but it will most likely come down to a case by case situation. The cost of added administrative duties, coupled with the current high fallout by borrowers that have already had their home loans modified, may be enough for many lenders to limit their participation in the program.
Only time will tell whether the program is successful, and hopefully we will have a more accurate picture of it’s impact in the coming months. Anything that will help people to stay in their homes and prevent further foreclosures will be a benefit for us all.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
One to four unit primary residence homes will qualify under the plan, but investment properties are excluded.
The Treasury will partner with lenders to reduce monthly mortgage payments to a 31% front end dti (new principle, interest, taxes and insurance payment divided by individual’s gross monthly income). There is no restriction on the back end dti (which includes PITI plus all other credit items), but those that come in at 55% or over will be required to work with a HUD approved counselor.
Loan servicers will receive an upfront incentive payment of $1,000, and an additional $1,000 yearly payment for three years, as long as the borrower stays with the modified loan program. Borrowers will receive a pay-for-performance success payment up to $1,000 for five years (as long as all monthly payments are made on time) that will go directly to reducing principal. Also, a one-time bonus incentive payment of $1,500 for lenders and $500 for servicers, will be paid for loan modifications done for borrowers that are current on their home mortgage. No modification charges or fees will be borne by the borrower.
Lenders will only be compensated when the front end dti of 31% is achieved. The Treasury will pay half of the difference between the monthly payment reduction from 38% dti to 31% dti.
Will this be enough incentive for lenders to modify loans for those that cannot, or are having difficulty making their monthly mortgage payments? The incentives will most likely help, but it will most likely come down to a case by case situation. The cost of added administrative duties, coupled with the current high fallout by borrowers that have already had their home loans modified, may be enough for many lenders to limit their participation in the program.
Only time will tell whether the program is successful, and hopefully we will have a more accurate picture of it’s impact in the coming months. Anything that will help people to stay in their homes and prevent further foreclosures will be a benefit for us all.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: bad credit, economy, finance, home loans, loan modification, refinance, refinancing
posted by Jim Bisnett at
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