The Treasury today unveiled guidelines for its new “Making Home Affordable” loan modification plan, which aims to help seven to nine million homeowners get their hands on more sustainable home loans.
Aside from the bad name choices, there are a few items of note that I’ve listed below.
The “Home Affordable Refinance Program” (HARP) will be available to roughly four to five million homeowners with “solid payment history” on existing Fannie Mae or Freddie Mac loans.
However, borrowers must also provide a letter of hardship, explaining that a change in circumstances or a rise in mortgage payments will lead to default.
Meanwhile, the “Home Affordable Modification Program” (HAMP) will strive to help three to four million at-risk homeowners and those already in foreclosure by reducing monthly mortgage payments to as low as two percent.
Aside from all the guidelines and incentives previously mentioned, here are the biggies:
– There is no minimum or maximum loan-to-value ratio for eligibility purposes.
– Loans can be refinanced or modified up to the current high-cost jumbo loan limit
– Loans originated on or before January 1, 2009 are eligible
– Borrowers must fully document income, sign an IRS 4506-T, provide two most recent pay stubs, most recent tax return, and sign affidavit of financial hardship
– Mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac
– Must be one to four unit primary residence
The Home Affordable Refinance program ends in June 2010, while the loan modification program will run from now until December 31, 2012 (loans can only be modified once).
“Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program.”
“Extinguishing second liens will make mortgages more affordable, improve loan performance, and help prevent foreclosures.”
Second mortgages will not be included in the front-end debt-to-income ratio, making it a whole lot easier to get the housing payment down to the desired target of 31 percent.
It’s a bit unclear how high the loan-to-value will go on the Fannie/Freddie refinances, though as I previously reported, the 105 percent cap may be lifted.
Update: The max loan-to-value for the Home Affordable Refinance program is now 125 percent LTV and the program has been extended until June 30, 2012.
Update II: There is now no max LTV for HARP refinances, meaning just about anyone can take advantage of the program regardless of their underwater position.