Home Modification and Refinance Program Changes

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The “Making Home Affordable Program” has had its ups and downs. The program was introduced by the Obama Administration in 2009 to help get the economy back on track. The goal was to stabilize the housing market and help 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.To do this, the government would work with up to 4 to 5 million homeowners with loans guaranteed by Fannie Mae or Freddie Mac to refinance their monthly payment into something more affordable.The problem has been in the amount of paperwork and people looking to participate in the program getting the run around. The second problem is for those who still owe a large amount on the principal of their home which doesn’t match the home’s value.Now, the Obama administration is looking at ways to offer piggyback lenders incentives to lower payments on second mortgages.This has been followed by the Treasury Department planning to help find ways to streamline the process designed to get more borrowers to complete the loan modification program. The program can help reduce mortgage rates to as low as 2 percent for five years.Even with this, economists and mortgage experts continue to press the government into forgiving loan balances to restore equity to borrowers who owe more than their home is worth. They say without addressing the real problem, more and more people will walk away from their homes and accept foreclosure rather than make payments on properties overpriced.What will the Treasury ultimately do? It is possible they may seek ways to streamline refinance programs instead and make it easier for those seeking refinancing to qualify. For instance, they could make pay stubs an acceptable means of verifying income rather than tons of tax documents.With the original plan, not only were borrowers to submit a ton of documents to qualify but also those receiving the documents were overwhelmed by the amount of paperwork to sift through. Paperwork was getting lost and those trying to qualify were getting lost in the shuffle.Now, the Treasury Department is not only reducing the amount of paperwork but also lengthening the trial period borrowers were getting of three months to five months.In addition, servicers must acknowledge borrowers within 10 days receipt of their paperwork and also let the borrower know within 30 days if he or she is approved for the trial modification. If the documentation is not complete, the servicer must tell the borrower where the problem is.But the idea of ‘equity forgiveness’ is still not off the table and as complex as it would be to implement, the Obama administration is still trying to work it out.