The Obama Administration has introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize our housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.

The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

The consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration's program. Through this website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a handy checklist of key documents and materials to have ready when making that important call to their servicer as well as FAQs from borrowers in similar circumstances; and much more.

We hope that you will find this website informative and useful as we all work together to solve our nation’s housing crisis and put our country on the path to a lasting economic recovery

Obama proposes ‘Cash for Caulking’

WASHINGTON – Dec. 10, 2009 – President Obama proposed a program Tuesday that would reimburse homeowners for installing energy-efficient appliances, windows and insulation.

Under what has been dubbed “Cash for Caulking,” homeowners would get a 50 percent rebate on items like energy-efficient air conditioners, heating systems, washing machines and dryers, refrigerators, replacement windows, and insulation up to $12,000, meaning a household could spend $24,000 and get $12,000 back. There will likely be no income restrictions.

Steve Nadel, director at the American Council for an Energy-Efficient Economy, who is helping to craft the legislation, says they are contemplating having contractors or retailers pay part of the cost upfront to ease the need for homeowners to come up with lots of cash.

Source: CNNMoney.com (12/08/2009)

House Democrats are seeking to tap the government’s massive bailout fund to help homeowners who have lost their jobs and are struggling to make their mortgage payments.

House Financial Services Committee Chairman Barney Frank (D-Mass.) on Monday signed on to a proposal by Rep. Maxine Waters (D-Calif.) that would channel $3 billion from the federal Troubled Assets Relief Program toward mortgage relief for jobless Americans. The measure would designate another $1 billion for a program that gives grants to state and local governments to purchase foreclosed properties and use them for more productive purposes.

“The combination of unemployment and foreclosures may be the greatest threat to our economic recovery,” Waters said.

The proposal is one of more than 100 proposed amendments to a sweeping financial regulatory reform package scheduled for consideration in the full House this week.

In addition, Democratic lawmakers are planning to use the regulatory reform bill to revive a provision that would allow bankruptcy judges to modify a homeowner’s mortgage, including lowering the interest rate or cutting the principal owed. The provision passed the House earlier this year but is fiercely opposed by the financial services industry and was voted down in the Senate.

The renewed efforts come in the wake of recent complaints by the Congressional Black Caucus about the Obama administration’s handling of the economy. Caucus members, alarmed by the particularly harsh toll that foreclosures and unemployment have wrought on minority communities, have pushed in recent weeks to provide more tangible help to ailing homeowners. The caucus has held numerous meetings with White House officials and delayed a vote on the regulatory reform bill to draw attention to its concerns.

The Obama administration’s foreclosure prevention program, known as Making Home Affordable, has faced pressure recently because lenders have moved only a small percentage of borrowers from the initial trial phase to a permanent loan modification. Data to be released by the Treasury Department this week will show that about 6 percent of borrowers enrolled in the program so far have moved from trial modification to permanent adjustment, according to two industry officials.

Treasury officials called a meeting with industry leaders on the issue Monday as part of a campaign to address the challenges borrowers face in receiving permanent modifications, Michael S. Barr, a Treasury assistant secretary, said in a statement. Mortgage servicers “are on notice that they must ramp up and provide sustained relief to struggling homeowners now,” he said.

Industry officials say the small percentage reflects hundreds of thousands of borrowers who have not provided enough documentation to prove they are eligible for the program. But housing advocates argue that many homeowners remain in limbo even after submitting documents multiple times. Treasury is scheduled to release detailed data this week showing which lenders have completed the greatest number of modifications.

Mortgage industry officials, meanwhile, are less than thrilled that the so-called “cramdown” provision, which would allow judges to modify loans, might get a second chance in Congress.

“We continue to think it’s a bad idea, especially given the market of uncertainty” the country is in, said Steve O’Conner, a senior vice president at the Mortgage Bankers Association.

The measures proposed by Frank, Waters and others would become part of a wide-ranging bill to overhaul the nation’s fractured financial regulatory structure. Frank’s committee in recent months has approved a series of measures, including bills to establish oversight of the vast derivatives market and create an agency to regulate credit cards, mortgages and other consumer loans. The bills, which passed separately through the committee, will be bundled into one piece of legislation for consideration in the full House. Debate on the inclusive bill is scheduled to begin Wednesday, with a final vote by week’s end.

Copyright © 2009 www.washingtonpost.com

FHA to toughen rules for borrowers

The Federal Housing Administration is proposing to increase the up-front cash paid by borrowers as part of an effort to shore up the agency’s finances, which have been staggered by rising defaults in its flagship mortgage insurance program, according to FHA officials.

The changes also include raising minimum credit scores for borrowers who receive FHA-backed mortgages and limiting the amount of money sellers can kick in, including paying closing costs or giving free upgrades.

These measures are designed to increase the amount borrowers invest in the homes they buy, thereby making it less attractive for them to default on loans and walk away from properties, as many people have done during the current housing crisis.

Housing and Urban Development Secretary Shaun Donovan is scheduled to announce the agency’s policy changes when he testifies Wednesday before the House Financial Services Committee.

The FHA has played a critical role in propping up the housing market by insuring lenders against default after the mortgage market unraveled. Currently, the agency backs about 30 percent of all loans for home purchases and 20 percent of refinancings. In the past, the FHA has resisted raising downpayments or insurance premiums for fear of shutting out qualified borrowers and stunting the housing market’s slow but steady recovery.

But Donovan plans to tell the House committee that the exploding volume of loans the FHA is now handling requires stricter risk controls than the previous administration had in place, according to a copy of his prepared testimony. A recent audit shows that the FHA’s financial cushion already has eroded below the level required by law.

“We’ve learned from recent history that the market is fragile, and we have to plan for the unexpected,” Donovan’s prepared statement says. “That uncertainty is complicated by an organization we inherited that, to be honest, was simply not properly managing or monitoring its risk.”

By requiring that borrowers bring more cash to the table, the agency is seeking to ensure they have “more skin in the game and a stronger equity position in their loans,” Donovan says. But he does not specify the size of the proposed increase. FHA officials said they have yet to determine how much cash will be required.

“There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission,” Donovan says.

Up-front cash can include downpayments as well as other payments. For now, FHA borrowers can put down as little as 3.5 percent, a level that many FHA critics say is too low. One lawmaker has introduced legislation that would boost the minimum downpayment to 5 percent.

As for seller concessions, the agency now allows sellers to kick in 6 percent of the home’s value. Donovan said he wants the maximum permissible level to be lowered to 3 percent, in line with industry norms.

Agency staff is reviewing whether to increase the monthly insurance premiums charged to borrowers, officials said. These payments come on top of insurance paid up front.

The current up-front premium is set at 1.75 percent of the value of the loan. FHA may decide that an increase in that premium is needed also, officials said.

To protect itself against the riskiest borrowers, the agency has decided “for the time being” to raise its minimum credit score requirements for new borrowers. Again, FHA staff is still analyzing what the new threshold should be, Donovan’s prepared testimony says.

The minimum credit score requirement is now so low – 500 out of a possible 850 – that it’s basically irrelevant. Many lenders that make FHA-insured loans impose much tougher restrictions. The concern is that if FHA does not toughen up, abusive lenders will get away with financing risky, poor credit borrowers already rejected by more reputable lenders.

Most of the new initiatives do not require congressional approval. Many have previously been suggested by critics and even supporters of the agency.

These measures are meant to build on other actions the FHA has taken to curb its risk and beef up its eroding cash reserves.

An audit released last month found that the agency’s cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out.

The audit, designed to measure the agency’s financial health, examined the excess cash the agency must set aside to deal with unexpected losses and found that those reserves were at about $3.6 billion as of Sept. 30, a drop from the $12.9 billion available a year earlier. The current total represents 0.53 percent of all outstanding single-family-home loans insured by the FHA, well below the 2 percent threshold set by law. This is the first time reserves have fallen under that level since 1994.

To stop the financial erosion, the FHA has focused in part on weeding out abusive lenders. This year, the agency has suspended business with seven lenders, including the now-defunct Taylor, Bean and Whitaker. It has withdrawn FHA-approval for 270 others, including Lend America. On its Web site Tuesday, Lend America said it has ceased its loan origination and operations, effective immediately.

The FHA is currently working on a new rule that would require banks it does business with to have up to $2.5 million in capital that they can use to repay the agency for losses if they were involved in fraud. Now, they are required to hold only $250,000.

On Wednesday, Donovan will ask Congress to grant the agency more authority to close down abusive lenders.

Copyright © 2009 www.washingtonpost.com