About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under Government Mortgage Financing Programs News

The full FAQ on the newly announced program can be found here. Some of the highlights are below:

Frequently Asked Questions


Q: When will homeowners begin to receive help under the new enhancements?

It will take time to get these new program enhancements up and running. Some pieces, such as
increased payments for alternatives to foreclosures, will be put in place in the coming weeks. We
anticipate the full set of programs to be available by the fall.

Q: I think I may be eligible for the temporary assistance for unemployed homeowners. When
will this program be available to eligible borrowers?

We will move to implement this as quickly as possible and expect it to be offered within the next
few months. Some major investors and servicers have similar programs in place today.

Q: If I qualify for the forbearance period, will I be eligible for a HAMP modification at the
end of the forbearance period if I become employed?

At the end of the temporary assistance period, homeowners who have a mortgage payment
greater than 31 percent of their monthly income must be considered for a permanent HAMP
modification. To receive the permanent HAMP modification, homeowners must verify
qualifying income with standard documentation and must be current on forbearance plan
payments, and the modified loan must pass the standard net present value (NPV) test. It is
important to note that unemployment insurance will not be counted as income when a
homeowner is evaluated for HAMP at the end of the forbearance plan. Not all unemployed
homeowners will receive a HAMP modification at the end of the temporary assistance period.

Q: I owe more on my house than it is worth. How do the HAMP changes help me and other
underwater homeowners?

Homeowners who are significantly underwater and who are eligible for the HAMP program will
benefit from changes that will motivate lenders to writedown more principal. This will help
homeowners regain some of the equity lost due to severe home price declines in many regions of
the country. The changes will require all servicers to consider an alternative modification
approach which includes writedown of some principal for loans that are over 115 percent of the
current value of the property (LTV). Servicers will earn increased incentives for offering
principal writedowns in conjunction with a HAMP modification. The alternative payment
reduction option will allow homeowners to regain lost equity in their homes just by remaining
current on their modified payments. Servicers will initially forbear some or all of the principal
balance over 115 percent LTV as needed to bring the borrower’s payment to 31 percent of
income. Then, servicers will forgive this forborne amount in three equal amounts over 3 years, as
long as homeowner remains current on payments.

Q: How do I know if I qualify for principal reduction in HAMP?
If your property is worth at least 15 percent less than the amount of your first mortgage you may
be eligible, but not every underwater borrower will benefit from principal reduction through the
HAMP program. Your servicer or investor will contact you if you are eligible.

Q: Will these changes require my servicer to write down my principal?
No, principal writedown will not be required. However, we are providing increased financial
incentives and expect that where principal write-down yields a greater economic benefit, based
on the net present value (NPV) test comparison, lenders will generally choose to pursue the
principal writedown option when they are legally permitted to do so.

Q: I have an existing HAMP modification. Will I be able to take advantage of the new
principal forgiveness program?

Possibly. The increased incentives will be available to servicers who elect to review loan that
have already been modified under HAMP to determine if principal forgiveness would help bring
those mortgages closer to a market value.

Q. I have both a first and a second lien, is there any payment assistance available for my
second lien?

Yes, many borrowers whose first mortgages are permanently modified under HAMP may now
be eligible for payment relief on their second lien if their servicer is participating in the Second
Lien Modification Program (2MP). We have increased incentives in this program to encourage
servicers and investors to either forgive all or a portion of qualifying second liens

Q: I have applied for a HAMP modification but continue to receive notices from my servicer
that I am in foreclosure. Are there new protections to prevent the servicer from selling my
home while I am being considered for the HAMP modification?

Yes. New and clarifying guidance provides protection for responsible borrowers against
initiation of costly and unnecessary foreclosures while the borrower is being considered for
HAMP. The guidance clarifies the solicitation requirements for borrower eligible for HAMP,
including mail and phone outreach. In addition, the guidance provides improvements in
communication about the foreclosure process to reduce confusion for borrowers who are
simultaneously in foreclosure and either being evaluated for HAMP or in a trial payment plan.
Also, the guidance requires written certification that a borrower is not HAMP eligible before an
attorney or trustee can conduct a foreclosure sale.

Q: I was told that I did not qualify for HAMP because I have filed for bankruptcy protection.
How will the new enhancement impact me?

As a result of the new guidance, servicers are required to consider a borrower in bankruptcy for
HAMP if the borrower or the borrower’s bankruptcy counsel asks for help. The guidance also
includes new features to facilitate the process for them.

FHA Refinance Options

Q: I owe more on my home than it is worth. How can the FHA Refinance option help me as
an underwater borrower?

The Federal Housing Administration (FHA) is making some changes to its existing refinancing
program guidelines that will allow more lenders to perform mortgage principal write-down for
underwater homeowners in mortgages not currently insured by FHA. These adjustments will
provide more opportunities for qualifying mortgage loans to be responsibly restructured and
refinanced into FHA loans as long as the borrower is current on the mortgage and the lender or
investor writes down the unpaid principal balance of their mortgage by at least 10 percent of the
original first lien of the borrower. A second lien write-down program will be paired with these
changes to encourage further write-down of second liens such that total mortgage debt (first and
second liens) is no greater than 115 percent of the current value of the home.

Q: Am I eligible for a FHA Refinance loan?
This is a voluntary refinancing and lenders must agree to the writedown. However, the new
FHA refinance option is only available to responsible homeowners who are current on an
existing mortgage that is not insured by FHA. Eligible borrowers must occupy the home as the
primary residence and will also have to meet FHA standard documentation and other
underwriting requirements. In addition, to participate in the program, all homes will be appraised
to determine current market value. The LTV loan for the new FHA loan must be no greater than
97.75 percent of the appraised value of the home.

Q: When will the FHA Refinance loan be available to underwater borrowers?
FHA will move to implement this as quickly as possible and expect that lenders can begin
making decisions by the fall. Specific guidelines will be posted in a FHA Mortgagee Letter in
the near future.

Q: How do I apply for an FHA refinance loan?
Because this program is voluntary for lenders, not all underwater borrowers who meet the
eligibility standards will receive an FHA refinance loan. You will be notified by your lender if
you have been selected to participate in the program.

Q: I have an FHA-insured loan. Why am I not eligible for this principal forgiveness?
FHA-insured borrowers are currently eligible for extensive loss mitigation assistance to prevent
foreclosure and make mortgage payments more affordable. FHA is currently prohibited by
statute from offering explicit principal forgiveness to FHA-insured loans.

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