Consumer Financial Services Alert - April 6, 2010

The Obama administration announced changes to the Home Affordable Modification Program and to FHA programs. Among other things, servicers participating in the Home Affordable Modification Program must (1) temporarily reduce payments to no more than 31% of a borrower’s income and offer a temporary assistance plan for qualifying unemployed borrowers, (2) consider principal write-downs and reductions in certain situations, and (3) increase borrower outreach efforts. The FHA changes will allow underwater borrowers to refinance into FHA loans. In connection with the FHA initiative, lenders will be incentivized to ensure that qualifying loans, including second lien mortgages, are within 115% of the home’s current value. The Home Affordable Modification Program changes are expected to be in place in the next few months, while the FHA initiative will be implemented this Fall.Click here for the related announcement.

Updated frequently asked questions for servicers that have entered into agreements to participate in the Home Affordable Modification Program have been issued, as well as the related Conversion Campaign. Click here for the general FAQs and here for the Conversion Campaign FAQs.