Treasury Department secretary Tim Geithner and US Department of Housing and Urban Development (HUD) secretary Shaun Donovan together announced new initiatives within the administration’s Making Home Affordable (MHA) program. The additional programs aim to increase participation in MHA and offer alternatives where borrowers and servicers cannot achieve modification.
The secretaries announced financial incentives for servicers and borrowers who decide to pursue short sales and deeds-in-lieu of foreclousre as an alternative to costly foreclosure in situations where MHA-qualifying borrowers cannot complete the refinance process. The secretaries also announced new financial incentives for modifications by lenders who fear “severe” home price declines may continue in a particular case.
“Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed,” HUD officials said in a media statement moments ago.
HUD also said today it requested a $100m investment in its counseling program on housing for fiscal year 2010, a $35m increase from the previous-year budget, to support its network of counselors that assist borrowers seeking to refinance through MHA.
I Thought They Wanted to Keep Me in My Home?
Yes, you’re correct…the whole idea behind the Home Affordable Modification and Refinances is to give you the best chance possible to stay in your home.
But they’ve also realized that sometimes this is just not possible. And they want to give banks incentives to give homeowners less threatening ways out then through the foreclosure process.
Just like in the Home Affordable Modifications and Refinances, the way they do that is by throwing money at the servicers to encourage them to allow you to sell your home through a short sale or give it back to the bank through a deed in lieu rather than losing it through foreclosure.
So What Now?
Just like with the Home Affordable Second Mortgage program announced last week, the details on this are still sketchy. I assume that servicers will simply add this to their current loss mitigation process. This means they will likely take you through this process:
1. Refinance. if that won’t work,
2. Modification. if that doesn’t work,
3. Short sale. If that doesn’t work,
4. Deed in lieu. If that doesn’t work,
5. Foreclose.
What’s It Mean to Me and My Family?
The biggest thing it means is more time in your home before you lose it to foreclosure. When taken together, the Making Home Affordable program should also allow millions of homeowners to stay in their homes rather than losing them. For those that can’t it will extend how long you can stay, which gives you more time to plan and save money…don’t waste it!
May 22nd, 2009 at 9:06 am
Hey Todd,
Not sure where to post this, however, I recently got a request to write a hardship letter for someone wanting to get approval for a short sale on…. a boat.
Outside of ensuring I get enough details to make a good hardship case, any suggestions?
It must be a nice boat… because the payment is more than many house payments I’ve seen.
Thanks so much for any insights you can provide,
Becky
Todd Reply:
May 25th, 2009 at 1:18 pm
I don’t really have much else to add, but I did post an example of the hardship letter I’m using for the short sale of my home in Virginia. Maybe it’ll be helpful…It’s part of a 3-pack of sample hardship lettersI’ve posted on Scribd.
June 4th, 2009 at 6:59 am
Hi, good post. I have been wondering about this issue,so thanks for posting.