HAMP adds incentives for principal reduction
Expansion of mortgage-modification program includes rental properties, homeowners with significant debt and possibly borrowers whose mortgages are backed by Fannie and Freddie.
The federal government announced Friday afternoon that it was expanding the Home Affordable Modification Program to include rental properties and that it would triple the amount it pays lenders to write down principal on underwater loans.
The increased maximum payment for principal writedowns — from 21 cents on the dollar to 63 cents — is aimed at Fannie Mae and Freddie Mac, the government-sponsored enterprises, now under conservatorship, that back about half of all U.S. mortgages. The Federal Housing Finance Administration has refused to write down principal on those loans up to this point, citing the cost to taxpayers.
The deadline to apply for a HAMP modification was extended a year, to December 2013.
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The revised rules will also change the way debt-to-income ratios are calculated for homeowners with second mortgages or large credit-card or medical debt.
Officials would not estimate how many homeowners could be helped by these changes, but the number could be significant — especially if Fannie and Freddie decide to embrace principal reductions.
There was no immediate word from mortgage servicers or FHFA after the expansion of the program was announced Friday afternoon.
"We have previewed the changes with the servicers," Treasury Assistant Secretary Tim Massad said, as reported by Housing Wire. "We got a very positive initial reaction."
Massad said the FHFA was studying the proposal.
Housing Wire sums up the HAMP effort up to this point: