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Making Home Affordable Programs – Updates for Mortgage Holders and Servicers

On April 28, 2009, Treasury announced updates to the Making Home Affordable Program.  As previously discussed, the Treasury’s Making Home Affordable Program, which is aimed at helping 7 to 9 million homeowners, consists of two programs: The Home Affordable Refinance Program and the Home Affordable Modification Program.  The newly announced updates address modifications to second mortgages where the first mortgage has been modified under the Home Affordable Modification Program.

The Making Home Affordable Program is a completely voluntary program.  However, mortgage holders and servicers that do sign up for the Program, should realize that they must modify any second mortgage for a homeowner whose first mortgage has been modified under the Program.   A mortgage holder cannot elect not to modify a second mortgage once it has entered the Program.  A list of participating institutions is available here.

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Making Home Affordable Programs – Updates for Homeowners

On April 28, 2009, Treasury announced updates to the Making Home Affordable Program.  As previously discussed, the Treasury’s Making Home Affordable program, which is aimed at helping 7 to 9 million homeowners, consists of two programs: The Home Affordable Refinance Program and the Home Affordable Modification Program.  The newly announced updates address modifications to second mortgages where the first mortgage has been modified under the Home Affordable Modification Program.

The important thing for homeowners to recognize is that the modification to the second mortgage is automatic.  That is, if the holder of the second mortgage is a participating servicer under the Making Home Affordable Program, then the holder must modify the second mortgage whenever a first mortgage is modified under the Program.  The updates address both traditional, amortizing second mortgages and interest-only second mortgages.

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The Lottery is Not an Acceptable Funding Source

On March 3, 2009, the FDIC published Financial Institution Letter FIL-13-2009 on the use of volatile or special funding sources by financial institutions that are in a weakened condition.  The guidance generally suggests that banks should be run safely and soundly.

Directors and officers of institutions that are in a weakened financial condition are expected to oversee the operations of these institutions in a way that stabilizes the risk profile and strengthens the financial condition. Actions taken by a weak financial institution to increase its risk profile are inconsistent with this expectation.

While the guidance is overly broad, we believe the FDIC guidance may be focused on two practices:

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Summary of the Making Home Affordable Programs

On March 4, 2009, the Treasury announced the release of details for Making Home Affordable, which is comprised of two programs: The Home Affordable Refinance Program and the Home Affordable Modification Program. In total, these programs aim to help 7 to 9 million homeowners by making mortgages more affordable and by helping to prevent foreclosures.

The Home Affordable Refinance Program seeks to provide 4 to 5 million homeowners with the opportunity to refinance first mortgages to take advantage of the historically low mortgage interest rates.

The following criteria must be met to be eligible for this Program:

  • the home is one to four unit and owner occupied;
  • the loan is owned or controlled by Fannie Mae or Freddie Mac;
  • the mortgage payments are current;
  • the amount owed on the first mortgage is not more than 105% of the current market value of the home; and
  • the borrower has a stable income to support the new mortgage payments.

Homeowners looking to take advantage of this Program, should note two things: First, a borrower who is delinquent on first mortgage payments is ineligible. Second, only first mortgages are altered – second (or third) mortgages cannot be altered under this Program, which means a borrower’s eligibility will depend, in part, on any second (or third) mortgage holder agreeing to maintain a junior position even after the first mortgage has been altered.

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