SPECIAL EDITION
Obama Outlines Homeowner Affordability and Stability Plan
President Barack Obama today unveiled his administration’s Homeowner Affordability and Stability Plan designed to help up to 9 million at-risk homeowners modify their mortgages.
“ABA welcomes the Homeowner Affordability and Stability Plan announced today by President Obama. The plan is a constructive, flexible and multifaceted initiative likely to have a positive effect on preventing mortgage foreclosures,” association COO Diane Casey-Landry said. “The ABA is committed to working closely with the administration as it completes the remaining details of the plan.”
The plan has multiple elements:
· Refinancing through Fannie Mae and Freddie Mac. Under the plan, 4 to 5 million “responsible” homeowners with Fannie Mae or Freddie Mac loans, who owe more than 80 percent of their homes’ value, would be eligible to refinance at lower rates even if they have negative equity on their loans up to a 105 percent loan-to-value ratio. The program would help only homeowners occupying the property, not individuals who own property as an investor.
· Loan modifications with subsidies to lenders. Under a $75 billion loan modification program aimed at 3 to 4 million at-risk homeowners, lenders will be responsible for bringing down interest rates so that a borrower’s monthly mortgage payment is no more than 38 percent of pre-tax income. Treasury then will match those reductions dollar-for-dollar to bring payments down to 31 percent of pre-tax income. Lenders must agree to keep the modified payments in place for five years. As part of this initiative, servicers will receive $1,000 for each successful modification, and up to $3,000 over three years if the borrower stays current. Mortgage holders also will receive $1,500 and servicers will receive $500 if the modifications are made before a borrower defaults. Borrowers will receive up to $1,000 in principal reductions each year if they stay current on the modified loan.
· Insurance fund. Treasury and FDIC will create a $10 billion insurance fund to protect lenders against home value declines as a means to discourage foreclosures based on anticipation of falling home values.
· Treasury investment in Fannie/Freddie. To help retain confidence in markets necessary to maintain low interest rates, the Treasury Department will increase an existing funding commitment to Fannie and Freddie by buying $200 billion of their preferred stock, up from the agency’s previously preferred stock purchase agreement of $100 billion.
· Fannie/Freddie Portfolios. Treasury also will permit Fannie and Freddie to increase the size of their portfolios from $850 billion to $900 billion.
· Eligibility. Treasury will provide complete borrower eligibility criteria on March 4 when the program starts.
During a White House conference call on the program — in which ABA staff participated – administration officials indicated that they continue to support some form of mortgage-bankruptcy reform.
Read more.
Read a Treasury summary of the plan.
Read questions and answers on the plan.
Read case studies showing how the plan will work.
For more information, contact ABA’s Bob Davis.
|
ABA Daily Newsbytes is edited by Patrick Dalton, with contributions by John Ginovsky.
ABA Members: To unsubscribe and to manage your subscriptions, please visit ABA E-mail Bulletins and check or uncheck the appropriate boxes. For other inquiries, please email ABA Newsbytes Editor, or call 1-800-BANKERS.
American Bankers Association, 1120 Conn. Ave NW, Wash. DC 20036 |
