Making Home Affordable Update for
January 2010

Overall, only around 360,000 out of 6+ million eligible homeowners have started the mortgage modifications process with their lenders so far. Under the Making Home Affordable Program in which Congress enabled $75 Billion to be used as an incentive to mortgage lenders/servicers to reduce the monthly payments of distressed homeowners to 31 percent of a borrower's the income.

Only around 9% percent of homeowners needing help have actually been able to get their servicer to enter into the modification process as the incentive for banks through the Making Home Affordable Program to actually do the modifications was woefully inadequate. Servicers who actually offer modifications through the Making Home Affordable Program get only get $1,000 upfront and another $1,000 per year so long as the homeowner stays current, and homeowners can get $1,000 a year toward reducing their principal for up to five years.

So lenders/servicers will get at most $6,000 from the government while having to voluntarily write off future profits that can easily get into hundreds of thousands over the life of the loan. Homeowners mean while get $5,000 over 5 years if they stay in a house that could be easily be worth $250,000 less than what they owe on their mortgage. Not much of a win/win scenario and one that only the government could come up with.

Somewhere around 5% of the distressed borrowers who where initially eligible for mortgage modifications under the Obama administration's signature effort to reduce foreclosures have been helped so far, the Treasury Department reported . That is an improvement over the previous months report on lender/servicer participation in the "Making Home Affordable Modification Program".

The government says "At this early date, Making Home Affordable has already been more successful than any previous similar program in modifying mortgages for at-risk borrowers to sustainably affordable levels, and helping to avoid preventable foreclosures". Exactly what previous economic condition are they comparing this to?

Disappointed that servicers had been slow to help homeowners and stop the rise in foreclosures, the mighty money spending Obama administration lectured bank CEOs in a letter earlier this summer.

"We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," wrote Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan. He can say there's a need for them to do this until he's blue in the face, but with totally revamping the bogus Making Home Affordable Program it is never going to happen.

In early August the Treasury shamed servicers by releasing specific bank-by-bank data on participation in the program. The nation's largest, Bank of America, had done modifications for a mere 4 percent of eligible borrowers. In August, Bank of America improved to 7 percent.

Don't Plan on any of these meager improvements to temper disappointed bank critics and homeowners.

"Several months into the Making Home Affordable Modification Program homeowners and their proponents report that the program is not providing a sufficient number of loan modifications to homeowners, the modifications offered often do not meet the Making Home Affordable guidelines and the program itself still presents serious barriers to mass loan modifications," said Alys Cohen, a staff attorney with the National Consumer Law Center in prepared remarks before the housing subcommittee.

Making Home Affordable - How to Use The Fed's Program to Your Advantage

Lots of people are still talking about the Making Home Affordable plan that came out in March 2009.  The program has two basic parts: the HARP, or Home-Affordable Refinance Program, and the HAMP, or Home-Affordable Modification Program.  

These two programs are intended to keep housing prices for middle- and lower-class Americans stable.  Specifically, the primary goal is to keep families out of foreclosure.  This in turn keeps your home from selling below market value, which then keeps other homes in the area from experiencing a drop in value because of your home's low sale.  The government believes that by stabilizing housing costs and keeping families in their homes, they can help to stabilize the economy at large.

The HARP side of the Making Home Affordable Program is for the millions of Freddie Mac- and Fannie Mae-owned mortgages.  It affects homeowners that would normally be unable to refinance their mortgages (most often because they still owe more than the value of their home on the mortgage.)  The effect of the plan is to allow refinancing up to 105% of the value of the home at current interest rates.  The primary qualification for the HARP is a satisfactory credit rating.

The Program is made to keep families who are in (or are about to enter) foreclosure in their homes.  This program offers assistance to families who has suffered financial hardship due to an unexpected reduction in income (a lost job, for example) or who have an adjustable-rate mortgage that adjusted upwards.  The household cannot apply if they are entirely without income, but credit rating is not a factor.

The HAMP can lower your mortgage interest rate to as low as 2% for up to 5 years.  The bank may also extend the term of your mortgage to 40 years (typically that's an extra 10 years to allow you to pay back your mortgage, which can lower your monthly payments significantly.)  Finally, it can put a portion of your principle balance on forbearance - which means you don't have to pay interest on that portion for a period of time.  The goal of all of these measures is to ensure that your mortgage costs you less than one-third of your monthly household income.

Under this plan, your lender is able to determine how they want to modify your loan, and they don't always adhere to the spirit of the plan.  If your lender offers you new terms under the HAMP that you feel unfairly penalize you down the road (for example, a 40-year mortgage means you pay interest on your loan for an extra 10 years, which is a lot more money in the long run, even though the monthly cost is lower), consult an attorney or a reputable loan-modification company.

If you feel like you can benefit from the Making Home Affordable Program, talk to your family financial advisor and your mortgage lender about the effects of applying.

Making Home Affordable Update for December 2009

Many of you have followed our coverage on the Making Home Affordable Mortgage Program (otherwise known as the Obama mortgage) and made available by the US Government and Pres. Obama.  I'm sure many of you have been frustrated with the progress that has been made on a program that was once promised to help up to 9 million homeowners.  It looks like we're still under 300,000 homeowners having been actually helped by the Making Home Affordable

Now, we continue to look at the number of people the government says have been helped, because many of these homeowners will still be foreclosed on this program has simply pushed this program into the future.  There are simply too many homeowners who are too far under and are starting to realize it may take decades before they will actually owe less than what their homes are worth.

The government has sent out letters to different mortgage service companies asking them to step up their efforts with more staffing and training and asked many of the CEO's to a meeting in Washington.  We look at this more like big brother trying to push financial institutions into even further trouble by having them accept mortgage modifications and refinances that they would normally be unwilling to do and which are financially unsound decisions.

It appears that we have two areas of thought, but with very little data being made available by the government it is actually hard to tell which is correct at this point in time.

1. Is that the mortgage servicers are not modifying the loans, because it makes absolutely no business sense to do so.  Many times the mortgage companies are much better off financially to simply foreclose on the property.
2. Being overwhelmed by phone calls and letters, servicers just lack the capacity to be able to handle the large numbers of homeowners who are trying desperately to save their homes from foreclosure.  It looks like many mortgage servicers are simply dealing with the most delinquent homeowners first and although this does make sense it is holding up the line which creates backlog of homeowners, who are closer and closer to foreclosure without getting the help they need.

We've heard numbers thrown around the internet that treasury officials are stating they have hit their goal for loan modifications created in a week.  This looks to be in the 20,000 range, give or take.  Even with this number it is becoming more and more apparent this program will never get anywhere near helping the 9 million people it was created to help.

With commercial values continuing to plummet and residential ARM's and Negative Amortization loans continuing to recast into the foreseeable future.  The real estate market has maybe a decade and a half before we ever see the likes of 2004-2006 again.  There is a thought right now that the commercial market could easily do to Wall Street and the financial institutions what the residential market did to them at the end of 2008.  If this happens, we believe there will be very little chance the United States Government will be able to print enough money to prevent us from going into a deep recession.  If anything the trillions and trillions of dollars thrown at the financial problem so far will have us falling even further than we ever would have originally.

Stay tuned as we continually update our readers on any drastic changes to the Making Home Affordable Mortgage Program

Making Home Affordable Mortgage Program

In a move that indicates its original Making Home Affordable Program
was poorly planned -

The President Obama administration early Tuesday announced plans to widen the eligibility requirements of an important housing initiative. The change allows homeowners with loans worth at least 125 percent of their home's value to refinance into a more affordable loan. The earlier Making Home Affordable Program only allowed borrowers with loan values of 105 percent or less. The Making Home Affordable refinancing/modification plan is part of the Obama's multi pronged attack on the nations deepest housing decline since the Great Depression. Coupled with efforts to alter struggling mortgages, the administration considers its Making Home Affordable initiative can reach up to nine million American homeowners.

Here are six things you should know about the broadened rescue program:

1. Efforts so far - When it first rolled out the program in March of this year, the Barack Obama administration said the refinancing plan could possibly reach to six million homeowners. In its release Tuesday, HUD did acknowledge only tens of thousands of refinances had occurred so far, but not the millions first envisioned.

2. Additional housing tweak - The expansion of the Making Home Affordable plan follows the Barack Obama administration's recent change to its 1st time home buyer tax credit. In February, President Obama enacted this tax incentive, which provides up to $8,000 to qualified 1st time home buyer's, to stimulate housing demand and help mop up surplus supply. In May, HUD unveiled a program that will provide borrowers more immediate access to these funds.

3. Reaches Far & Wide - The new standards just might make million additional borrowers eligible to refinance or receive a loan modification through the Making Homes Affordable plan, according to the Federal Housing Finance Agency, which regulates Freddie Mac & Fannie Mae.

4. Freddie/Fannie - Despite the higher loan value cap, the initial framework of the program stays in tact. Only homeowners with mortgage loans held or guaranteed by government-controlled housing finance giants Freddie Mac or Fannie Mae can take part. At the same time, borrowers need to be current on their mortgage to have any chance at refinancing or getting a loan modification.

5. Falling prices = Falling equity - The widening of the qualification requirements comes as the housing market continues to erode. Home prices in 25 metropolitan areas fell by more than 20 percent in May from a year earlier. Sliding home prices suck the LTV out of homes. More than a 5th of American borrowers were considered underwater, meaning they owe more on their mortgages than their property is worth, from January through the end of March. This evaporation of home equity threw dirt in the gears of Obama's refinancing program. That is because the initial conditions of the plan prevented homeowners with home loans exceeding 105 percent of their properties value from taking part. But by widening the loan-to-value cap to 125 percent, even homeowners who are significantly underwater will be entitled to refinance through the Making Home Affordable Program.

6. Mortgage interest rate hurdle - But hold on, not all of those three million extra homeowners will end up refinancing their current loan. Some won't meet other plan requirements, such as being current on their mortgage loan. But it is the recent skyward trend in mortgage interest rates that presents perhaps the largest threat to the plan's success. Refinancing and loan modification applications soared last winter, after the federal government engineered mortgage interested rates of below 4.5 percent. Keep in mind that as bond traders continue to become rattled by sharper increases in government spending, they will, without any doubt in our minds, send interest rates soaring to above 6.75% by the end of the year.

Most homeowners generally need a full one percent point difference between their current mortgage interest rate and market interest rates in order to really benefit from refinancing, higher interest rates have pummeled the housing market. Even as interest rates have wandered lower in the last weeks, refinancing and loan modification applications have continued low. The average since 2003 is six percent, according to Freddie Mac. So the existence of mortgages that can be refinanced on a standard rate and term basis merely is not very large in the 5 percent range. We are really going to need interest rates to head back into the 4 percent range in order to get the mortgage bus rolling again.

Beware of Foreclosure Rescue Scams - Help Is Free!

Click here to go over the bill itself and see all of the "Making Home Affordable" guidelines

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