President obama's foreclosure relief program outline 2012 lou tulga
- 1. Slide Show by Lou Tulga CCIM CRB Based on Fact Sheet from the Office of Press Secretary
- 2. Overview of the President’s Plan Broad-Based Refinancing to Help Responsible Borrowers Save an Average of $3,000 per Year Homeowner Bill of Rights Initiate a Pilot Program to Transition Foreclosed Property into Rental Housing to Help Stabilize Neighborhoods and Home Prices Move the Market to Provide a Full-Year of Forbearance for Borrowers Looking for Work Pursuing Joint Investigation into Mortgage Origi- nation and Servicing Abuses
- 3. I. Broad Based Refinancing Plan Help homeowners who are current on mortgage payments and who face substantial barriers in getting refinancing though no fault of their own because Their mortgages are underwater Banks may be worried about losses not responsible for The President worked with housing regulators to make millions of Americans eligible for lower interest rates But, now the President will be calling on Congress to open up the possibility for assistance to even more homeowners
- 4. I. Broad Based Refinancing Plan Under the proposal borrowers with loans insured by Fannie or Freddie will have access to streamlined refinancing through those entities Borrowers, with standard non-GSE loans who are current with loan payments, will have access to refinancing through a new a new program run through the FHA…with no more unnecessary barriers
- 5. I. Broad Based Refinancing Plan Simple and straight forward eligibility criteria Current on their mortgage for the pasts 6 months and have missed no more than one payment in the previous 6 months A current FICO score of no less than 580 (ca. 90% of current mortgagors meet this requirement) The outstanding loan must not be larger than current FHA conforming loans for the area Refinancing for single-family, owner-occupied principal residence
- 6. I. Broad Based Refinancing Plan Borrowers will apply through a streamlined process New loan-to-value limits that may require lenders interested in refinancing deeply underwater loans (greater than 140 LTV) to write down the excess balance of these loans to meet the new LTV standards --reducing the risk to the new re-fi lender and erase the negative equity position of the borrower Refinancing Plan will cost ca. $5 - $10 billion which will be fully offset by using a portion of the proposed “Financial Crisis Responsibility Fee—imposed on the largest financial institutions
- 7. II. Home Owner Bill of Rights The Administration sees the mortgage servicing system as badly broker and would benefit from a single set of strong federal standards Simple, easy to understand Mortgage Forms No hidden fees and penalties No conflicts of interest between servicers, multiple investors and junior lien holders, etc. Early assistance and intervention for at-risk owners Continuity of contact within the process Time and contact requirements before beginning the foreclosure process
- 8. II. Home Owner Bill of Rights Safeguards Against Inappropriate Foreclosure Right of Appeal: Servicers must explain to all home owners any decision to take action based on failure to meet payments and provide reasonable opportunity to appeal that decision in a formal review process Certification of Proper Process: Prior to a foreclosure sale, servicers must certify in writing to the foreclosure attorney or trustee that appropriate loss mitigation alternatives have been considered and that the proceedings are in keeping with applicable law Borrower to get a copy of certification
- 9. III. Pilot Program…REORental The Department of Treasury and HUD along with FHFA are developing a strategy to transition REO properties into rental housing The strategy is intended to reduce the inventory of unsold homes, help stabilize housing prices, support neighborhoods, and provide sustainable rental housing for families FHFA and the Administration to develop a program to help manage REO properties and ease pressure on communities from presence of distressed housing
- 10. IV. Toward Forbearance for Borrowers Looking for Work Extension for FHA and HAMP programs to give such borrowers time to find work 12-Month Forbearance for Mortgages Owned by GSEs who have announced that for loans they own lenders may grant forbearance up to one year for borrowers out of work Move to major services: BOA and Wells Fargo have begun to offer this longer period to borrowers who are unemployed An newly emerging norm to provide 12-month forbearance
- 11. V. Joint Investigation in Mortgage Origination and Servicing Abuses DOJ, HUD, SEC and various state attorneys general have formed a “Residential Mortgage-Backed Securities Working Group under the President’s “Financial Fraud Enforcement Task Force” to investigate and alleged misconduct
- 12. VI. Employment from Rehabilitation Contracts The President will propose in the next budget to invest $15 billion in a national effort to put construction workers on the job rehabilitating hundreds of thousands of vacant and foreclosed housing and businesses by bringing expertise and capital from the private sector and expand innovative property solutions like land banks
- 13. VII. Expand HAMP Eligibility Open HAMP more broadly: Currently if a borrower’s first-lien mortgage debt-to-income ratio is below 31% they are ineligible But, many borrowers who do not meet this requirement, are still struggling because of junior lien and other debt obligations Expand eligibility to landlords of currently occupied or intended to be occupied properties because single family rentals are an important source of affordable housing
- 14. VIII. Increase Loan Modification Incentives to Help Borrowers Rebuild Equity Potential “write-down” of mortgage balances when borrower owes significantly more than the property value To continue to encourage investors to consider expanding the use of principal balance “write-downs” Currently, an owner of a loan receives between 6 and 21 cents on a dollar to write-down the principal