We Can't Wait: Recent Executive Actions to Support the Housing Market and Help Struggling American Homeowners

Today, the President traveled to Las Vegas to highlight a set of steps announced by the FHFA to make it easier for some homeowners to refinance their mortgages.  This will help responsible borrowers with little or no equity in their homes take advantage of today’s low mortgage rates. 

Over the past several months, the Obama Administration has worked with federal housing agencies, industry stakeholders and state and local governments to push forward several important executive actions to help stabilize the housing market and help struggling borrowers:

Helping Responsible Homeowners Afford Mortgages

• Helping more responsible borrowers refinance their mortgages (10/24/11):Today, the Federal Housing Finance Agency (FHFA) announced a set of changes to help a greater number of creditworthy borrowers refinance – particularly those who are underwater on their mortgages. By eliminating the maximum cap on underwater borrowers participating in the program, as well as eliminating certain risk-based fees and encouraging competition by addressing the issue of representations and warranties, these changes should help more Americans save several hundred dollars each month by taking advantage of today’s historically low interest rates. 

Helping Prevent Foreclosures and Keep Families in Their Homes

• Providing 12 months of mortgage forbearance for unemployed borrowers (07/25/11): The Administration announced it was extending the minimum forbearance period that unemployed borrowers could receive on their mortgages to a full year, up from four months in FHA and three months in the Home Affordable Modification Program (HAMP). This change will help borrowers stay in their homes while they look for jobs, which is not only good for those families but for the housing market by reducing the number of homes that go into foreclosure. These changes went into effect on 10/1/11.
   
• Encouraging servicers to speed up the HAMP modification process (07/06/11):To help encourage servicers to move quickly to modify distressed borrowers’ loans, the Treasury adjusted the incentive structure of HAMP payments to servicers. Treasury reformed the system from a flat $1,000 fee to variable fee to encourage modifications earlier in a homeowner’s delinquency. The new incentive structure is $1,600 for modifications before 4 months of delinquency, $1,200 for 4-7 months, and $400 afterwards.
• Single point of contact for HAMP borrowers (05/18/11): In conjunction with Treasury, the Administration has provided significant resources for homeowners seeking assistance through HAMP.  On May 18, the Treasury Department provided guidance requiring the 20 largest servicers participating in HAMP to provide a single point of contact for homeowners.  As of September 1 for new applicants to the program, and November 1 for homeowners who have already begun the application process, servicers are required to implement a Single Point of Contact system of customer service for their non-GSE loans, so that a homeowner seeking a modification or foreclosure avoidance assistance has one single relationship manager.  The relationship manager works with the homeowner throughout the loss mitigation process until all options have been exhausted.
   
• Right to neutral third-party appeal of modification denials (02/01/11): In the event a homeowner is not eligible for a modification HAMP requires servicers to notify the homeowner of this decision in writing using commonly understandable language, and to give homeowners 30 days to dispute the decision before a foreclosure sale can take place.  If a homeowner has been denied due to a negative net present value (NPV) result, servicers must disclose all of the variables that went into the NPV calculation and homeowners can also work with staff at the Homeowner’s HOPE Hotline and the HAMP Solution Center to resolve any issues.  Treasury has also made available online an NPV Calculator to help homeowners better understand their eligibility.

Reducing Housing Inventory to Increase Home Values, Improve Economy

• Transitioning vacant property owned by the GSEs/FHA into rental housing (8/1/11 – ongoing): In August, the FHFA, in conjunction with the Obama Administration released a request for information on ways to help address the growing inventory of Real Estate Owned (REO) foreclosed proprieties on Fannie and Freddie’s books, including   transitioning properties to rental housing. Together, the GSEs and FHA own about half of the REO properties across the country. These REO properties are at the end of the foreclosure pipeline, usually vacant and often not well maintained. As such, they have a disproportionate downward impact on local and regional housing prices. Taking steps to transition some of this inventory over into rental properties or other productive uses will help stabilize neighborhoods and home values, and encourage greater private investment into the real estate sector at a crucial moment in our economy. 

Helping Hardest Hit States

• Implementing the Hardest Hit Fund (2/19/10 – on going):Treasury has allocated $ 7.6 billion to help homeowners avoid foreclosure in the areas hardest hit by steep home price declines and unemployment. All 18 states and the District of Columbia are now accepting applications for the Hardest Hit Fund foreclosure prevention programs.

Increasing Transparency and Accountability

• New compliance reporting for the largest HAMP servicers (06/09/11 - ongoing): Since inception of the Making Home Affordable Program (MHA),Treasury has conducted a comprehensive compliance program to ensure that homeowners are being fairly evaluated for the program and that servicer operations reflect the primary aim of both Treasury and the Administration:  assisting struggling homeowners who may be eligible for assistance and ensuring that homeowners are being treated appropriately.   This past June, Treasury enhanced its public reporting by publishing servicer assessments for each of the 10 largest servicers in the Making Home Affordable Program (MHA).  These assessments are designed to provide further information to the public about servicer performance and prompt servicers to correct identified deficiencies by holding them publically accountable.  In the second quarter of 2011, two servicers were found to be non-compliant and, therefore, their incentive payments have been withheld.