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The following is the text of details provided by the Obama administration Friday of its plans to enhance the Home Affordable Modification Program in order to provide more help to homeowners:

1. Temporary Assistance for Unemployed Homeowners While They Search for Re-Employment

- Mortgage payments reduced to an affordable level for a minimum of 3 months, and up to six months for some borrowers, while eligible homeowner looks for new job.

* Payment set at 31 percent of monthly income or less while homeowner is unemployed via forbearance plan.

* Temporary assistance plan offered for a minimum of 3 months, and up to six months for some borrowers, subject to investor and regulator guidelines, ending when borrower becomes re-employed or scheduled assistance period expires. Borrowers who become re-employed during the scheduled assistance period and whose mortgage payment is greater than 31 percent of their new gross monthly income must be considered for HAMP.

- Servicers participating in the Making Home Affordable Program are required to offer assistance to all unemployed borrowers who meet eligibility criteria:

* Homeowners mortgage meets HAMP eligibility requirements, including 1) house is owner-occupied 2) loan balance is below $729,750 and 3) loan was originated before January 1, 2009.

* Borrower submits evidence that they are receiving unemployment insurance (UI) benefits.

* Borrower requests temporary assistance in the first 90 days of delinquency.

- At the end of the temporary assistance period, homeowners who have a mortgage payment greater than 31 percent of their monthly income must be considered for a permanent HAMP modification.

* To receive the permanent HAMP modification, homeowners must be current on assistance plan payments, must verify qualifying income with standard documentation, and must meet all other HAMP underwriting requirements including the net present value (NPV) evaluation.

* Unemployment insurance will not be counted as income when homeowner is evaluated for HAMP.

* If the scheduled assistance period ends without re-employment, the homeowner may be considered for HAMP alternatives to foreclosure including short sales and deed-in-lieu of foreclosure.

- No cost to government or taxpayers from the forbearance plans.

2. Requirement to Consider Alternative Principal Write-down Approach and Increased Principal Write-down Incentives

- Requirement for all servicers to consider an alternative modification approach including more principal write down for HAMP-eligible borrowers that owe more than 115 percent of the current value of their home.

* Servicers will be required to run the standard NPV and an alternative NPV that includes incentives for principal write-down and compare the results.

* If NPV is higher under alternative approach, servicer will have option to use it.

- Alternative principal reduction allows some underwater homeowners to reduce principal balance of their mortgage in steps over three years, if they remain current on payments.

* Under alternative approach, servicers assess the NPV of a modification that starts by forbearing principal balance as needed over 115 percent loan-to-value (LTV) to bring borrower payments to 31 percent of income; if a 31 percent monthly payment is not reached by forbearing principal to 115 percent LTV, the servicer will then use standard steps of lowering rate, extending term, and forbearing additional principal.

* Servicers will initially treat the write-down amount as forbearance and will forgive the forborne amount in three equal steps over three years, as long as the homeowner remains current on payments. o Additional guidance will address the treatment of second liens where applicable, which must also agree to first extinguish principal in conjunction with any principal reduction on the first lien.

- For borrowers who have already received a permanent modification, or who are in a trial modification, and are still current on payments at the time the alternative modification approach is operational (later in 2010), servicers will be required to retroactively consider extinguishing an amount of principal balance in the same amount that would have been forgiven under the new alternative approach.

* To further encourage principal write-downs, Treasury is also increasing the incentives that it provides for loans extinguished or partially extinguished in conjunction with the HAMP Second Lien Program.

* The following schedule will be available to lenders in exchange for all principal write-downs under HAMP at the time of a loan modification.

3. Improvements to Reach More Borrowers with HAMP Modifications

- Improve borrower solicitation and communication and expand opportunities for borrowers in bankruptcy

* Clarifies borrower solicitation requirements and defines "reasonable effort" on the part of the servicer to outreach to borrowers.

-- Encourages early intervention by requiring pro-active solicitation of all borrowers who meet the HAMP eligibility profile and have missed two or more payments.

-- Establishes minimum solicitation requirements that include both phone and mail attempts.

* Prohibits referral to foreclosure until a borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed, protecting responsible borrowers from unnecessary foreclosure actions and costs.

* Requires servicers to stop foreclosure actions after a borrower enters into a trial plan based on verified income.

* Requires written certification that a borrower is not HAMP eligible before an attorney or trustee can conduct a foreclosure sale.

* Establishes a 30-day borrower response period from the date of a non-approval notice during which foreclosure sale is prohibited. o Requires servicers to consider borrowers in bankruptcy for HAMP and removes barriers to HAMP evaluation.

-- Allows use of bankruptcy documents to verify income.

-- Allows waiver of the trial period in some cases were a borrower is already performing under a bankruptcy plan.

- Increase incentives for servicers to provide permanent modifications to homeowners

* Upfront servicer incentive payments increased for permanent modification to allow servicers to increase outreach and counseling efforts and to cover costs of implementing the updated program elements.

- Implement FHA-HAMP, expansion of HAMP to include homeowners with FHA loans.

* TARP funded incentives will be available to borrowers and servicers whose loans are modified under the FHA-HAMP guidelines. The incentives are comparable to the incentive structure of HAMP.

* FHA-HAMP provides FHA insured borrowers with modified mortgage payments set at 31 percent of gross monthly income, similar to a HAMP modification. o To be eligible for FHA-HAMP incentives, servicers must sign an agreement with Treasury.

4. Helping Homeowners Move to More Affordable Housing

- Increase incentives to provide more homeowners with foreclosure alternatives

* Increase payoffs to subordinate lien holders who agree to release borrowers from debt to facilitate greater use of foreclosure alternatives including short sales or deeds-in-lieu.

-- The new payoff schedule allows servicers to increase the maximum payoff to subordinate lien holders to 6 percent of the outstanding loan balance and doubles from $1,000 to $2,000 the incentive reimbursement that is available to investors for subordinate lien payoffs, subject to an overall cap of $6,000.

* Increase servicer incentive payments from $1,000 to $1,500 to increase use of foreclosure alternatives and encourage additional outreach to homeowners unable to complete a modification.

- Double relocation assistance payment for borrowers successfully completing foreclosure alternative to $3,000 o Help homeowners who use a short sale or deed-in-lieu to transition more quickly to housing they can afford.

Here are what some opponent's are saying about the HAMP program:

• "HAMP modifications are not well-suited to address many cases where homeowners have suffered a large temporary decline in income, as might be the result of job loss. In particular, because the modification calls for a reduction in the ratio of payments to income based on the current level of income, a reduction that would not be reversed if income were to return to its previous level, the required modification in such cases will often be too costly to qualify the program."
• "In addition, the program may not be very effective when the value of the mortgage greatly exceeds the value of the home. Some borrowers who believe that there is little prospect for house prices to recover enough to put the mortgage "above water" within some reasonable period of time will not participate in the program and instead walk away from their mortgages. Worse yet, other borrowers may shift beliefs only after entering the program; these borrowers are likely to default after many of the costs associated with the modification have already been borne."

Recent Articles about possible problems with HAMP:

• Brookings Institute article about HAMP Program
• The Truth about HAMP

There have been success stories involving the HAMP program....although not as many as the OBAMA Administration would like to see:

Mortgage Payment $2430

First missed payment: September (struggling every month but current through August)
Accepted into HAMP: October 20
Trial Period: December - February
Trial Payment: $2160

Financial Worksheet: $225 DEFICIT before mod (they never dug into this fortunately because it would be higher if ALL monthly expenses were included, not just the categories on the sheet)
Back End Debt Ratio: 95%
Front End Debt Ratio 58%

MODIFICATION DETAILS:
Approval Agreement received on March 19
Permanent Payment: $1779 (includes $37/mo for catching up escrow shortage) Monthly savings of $68

• Wells Fargo Success Story for HAMP
• Homeowner Fought Back and Lives in Home for 11year payment free!

Being in Las Vegas, one of the most difficult situations home owners are having to deal with is how upside down we are.  Since the peak of our market in 2006, our prices have been hammered by 60-65% in most areas.   The idea that an FHA loan would allow you to refinance if you are 115% underwater is a joke to Las Vegans.  The most exciting part of the changes comes in the form of principle reductions.  If the government and banks can work together to forgive principle balances, then our housing market would start to truly see a recovery.   Banks should follow the lead of Bank of America which announced recently that they would start to reduce principle balances:

• Bank of America to reduce principle mortgage balances

Here is how the Bank of America program will work:

1. If you have a pay option ARM the bank will first look at your negative amortization account. With these loans borrowers were able to defer interest payments and these payments are held in negative amortization accounts. As part of the HAMP modification, the bank will eliminate this feature and forgive all or part of the negative amortization to reduce principal to as low as 95% loan to value (LTV).
2. Also, pay option ARMs will be recast to eliminate the negative amortization and converted to fully amortizing loans.
3. Next if the principal balance of the loan is greater than 120% LTV the bank will consider a set-aside of up to 30% of the principal as an "interest-free forbearance of principal." The amount set aside interest-free will be eligible for possible forgiveness.
4. In addition to pay option ARMs, some prime two-year hybrids and Countrywide mortgages will be included in this program.
5. As long as you pay your loan on time during a five year period, it's possible all the interest-free principal that was set aside will be forgiven. Whether or not all is forgiven will depend on the value of your home in the fourth and fifth year.

•  Read the full article in Bank of America Mortgage Forgiveness Article

Obama is doing his part as well:

The revamp also will require banks to consider writing down loan balances as part of the formula for lowering monthly payments under the federal Home Affordable Modification Program, or HAMP. That program, which is voluntary, is currently designed to lower monthly payments mostly by cutting interest rates to as low as 2% or extending terms to 40 years. Both banks and borrowers get federal incentive payments under the $50 billion program. 

• Wall Street Journal article about reducing principle
• http://www.dsnews.com/articles/white-house-to-announce-plans-cut-mortgage-principals-2010-03-25

If you have tried the HAMP or HAFA program and have decided to short sell your home, please give me a call toll free at 1-866-589-1646.  All your information is strictly confidential.

Felipe Crook

Prudential Americana Group Realtors

Las Vegas, NV 89117

1-866-589-1646