The U.S. Treasury department today released details of the Homeowners Affordability and Stability Plan.
This plan is intended to provide assistance to homeowners at risk of going into default, currently in default, or whose mortgage exceeds the value of their home.
The plan consists of three main components
Refinancing for “Responsible” Homeowners
- a Program for homeowners who had conforming loans with or guaranteed by Fannie or Freddie to allow them to refinance at lower rates even if their LTV is higher than 80%
- The Stability Initiative applies to “At Risk” homeowners who have a high debt to income or whose home value is now less than their mortgage value. Additionally you do not have to be behind to qualify
- Responsibility is shared by the lender and the treasury, the lender will have to reduce rates to make the payment no more than 38% of the owners income, the plan will match the reduction down to 31% for the borrower, the lenders will be required to keep the lower rate for 5 years then they can step it back up to a conforming rate. (Sounds like a fancy ARM to me)
- Lenders will be paid $1,000.00 for every mod they complete
- Mortgage holders who are current but “At Risk” will receive a $1,500 incentive to mod before they are behind, servicers get $500.00 if they agree to the mod of a current account
- Borrowers who have had a modification will receive a $1,000.00 per year balance reduction for 5 years provided they stay current… WHAT??? I need to get behind on my payments man… damn.
Support Low Rates
- The treasury is increasing its funding commitments for Freddie and Fannie from $100 billion each in preferred stock purchase agreements to $200 billion each.
- The $200 billion commitments are not made from funds in the Financial Stability Plan or the TARP program they are from the Economic Recovery Act.
I personally don’t like the plan nor do I support it. What do you think? Are you going to apply for a mod?