Administration Revamps HAMP to Reach More Borrowers

Administration Revamps HAMP to Reach More Borrowers


Changes announced Friday to the administration’s Home Affordable Modification Program (HAMP) are expected to extend relief to a larger share of struggling homeowners as well as renters, according to federal officials.

One of the key adjustments to the program centers around principal reductions. HAMP currently includes an option for servicers to provide underwater homeowners who are struggling with their payments with a modification that includes a principal writedown.

To encourage investors to agree to principal reduction modifications, Treasury is tripling the incentives for such restructurings, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value (LTV) ratio.

The Federal Housing Finance Agency (FHFA) has prohibited Fannie Mae and Freddie Mac from employing HAMP’s principal reducing option for their borrowers. Treasury has notified FHFA that it will pay these same principal reduction incentives to Fannie and Freddie if they allow servicers to forgive principal in conjunction with a HAMP modification.

FHFA issued a statement in response noting that it recently released analysis concluding principal forgiveness does not offer any greater benefits than principal forbearance as a loss mitigation tool.

But the agency says it will reassess the investor incentives now being offered, taking into consideration the number of eligible loans, operational costs to implement such changes, and the potential effects of incentivizing borrowers to remain current.

Among the other changes announced, borrowers who are struggling because of debt beyond their mortgages, such as second liens and medical bills, will be eligible for an alternative program evaluation with more flexible debt-to-income criteria.

In addition, Treasury will expand eligibility to include investor properties that are currently occupied by a tenant as well as vacant properties slated for rental use.

Tim Massad, Treasury’s assistant secretary for financial stability says single-family homes serve an important function as affordable rental housing, and foreclosure of investor-owned homes has disproportionate negative effects on low- and moderate-income renters, as well as communities.

The deadline for HAMP will be extended for an additional year through December 31, 2013.

To date, HAMP has helped approximately 900,000 struggling homeowners permanently modify their mortgage loans, providing them with a median savings of more than $500 a month.

Massad says the administration is committed to a multi-pronged effort to support American homeowners and the housing market recovery.

In addition to foreclosure prevention initiatives such asHAMP, Massad says the federal government plans to focus on transitioning foreclosed properties into rental housing, making it possible for responsible homeowners to refinance, and providing hard-hit states with resources to develop targeted relief programs.

It’s a sign of the times!

It’s a sign of the times!

Most of us grew up thinking that if we planned well and played by the rules, we’d never have to stand by as our financial lives unraveled. 


But upheaval on Wall Street, unacceptable rates of unemployment and plummeting real estate values have taken their toll.  Since 2007, 7.9 million homeowners have lost their homes to foreclosure. Current estimates are that one in four homeowners owe more on their mortgages than they could get from the sale of their home. Millions more homes will be lost to foreclosure before this real estate crisis runs its course.


The sad fact is that foreclosure is not an isolated event. For months leading up to the loss of a home, financially strapped homeowners live under a cloud of uncertainty.  And then for many years afterwards, the blow to credit gets in the way of buying another home or buying anything on credit. Foreclosure even complicates employment prospects.


The impact of foreclosure is huge and the sad fact is that it’s often avoidable.


As a real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, my mission is to provide financially strapped homeowners with options to foreclosure, ensure that they steer clear of scams, and help navigate them through the solution that best meets their needs.


Among the most important facts to keep in mind: the sooner help is sought, the better the options.


These are tough times, but more help is available than ever before. If you or someone you care about is ready to navigate away from the dark cloud of an unmanageable mortgage and realize that hope and blue skies are within reach, contact me today and let’s get started.


Shane Torres, Real Estate Expert
CDPE/SFR/CIAS/203K Specialist
RE/MAX Real Estate Concepts
1830 Princeton Dr. Ste C
Grimes, IA 50111
Licensed Real Estate Agent in Iowa

Phone 515-984-0222

Fax     866-838-0904

For Information on foreclosure alternatives visit

visit my web site at for more information on current listings


Banks see value of short sales

Please see the article written by David Elbert.

It was very well written and tells facts of short sales. 



Short sale is a term you’ll hear a lot more in coming months as homeowners and banks try to bail out underwater mortgages.

The term is often associated with falling stock markets, where short selling drives down stock prices.

But there is a different meaning when “short sale” is applied to real estate. It’s a meaning that more buyers and sellers need to understand at a time when 10 to 15 percent of metro area home sales qualify as short sales.

The real estate definition of short sale involves selling a home that’s underwater, which means the mortgage is larger than the market value of the property.

If the difference is too big, it can prevent the owner from selling the house, because a sale will not bring in enough cash to pay off the mortgage and provide a clean title for the new owner.

Increasingly in recent years, when underwater homes can’t be sold, they go into foreclosure, which leads to banks taking title and then doing nothing for several months or even years as the property deteriorates. By the time banks get around to selling foreclosed properties, they are typically worth only a fraction of their original value.

A short sale allows the bank and homeowners to avoid sliding into that downward spiral.

In a short sale, the lender agrees to accept market value for a house and write off the unpaid portion of the mortgage. That allows the original homeowner to walk away without continuing to owe the lender the unpaid balance of the mortgage.

To successfully complete a short sale, homeowners must pass a series of tests designed by banks to prevent abuses, said Shane Torres, a ReMax agent who handled 35 short sales last year and has another 35 or so pending now.

Banks finally realize what they need to do

Until recently most lenders did not have procedures in place to handle short sales, said Mike Knapp, chief executive of Iowa Realty, the state’s largest real estate agency.

The recent increase in short sales is the result of banks finally recognizing the problem and deciding its time to “clear out some of the inventory” of underwater mortgages, said Arthur Cox, who teaches real estate courses at the University of Northern Iowa.

For most banks, the last thing they want to do is take a loss on a loan. They put it off as long as possible, hoping market conditions will improve or that the financial condition of the borrower will improve.

But after four years, the big national banks that made unrealistic loans to unqualified borrowers are finally realizing that things will not get better on their own.

Until now, the big banks have largely resisted pleas from borrowers, government officials and social activists that the banks write off a portion of underwater home loans as a way to keep people in their homes.

Instead, the banks lowered interest rates and extended payment periods, actions that lowered monthly payments while increasing the total that borrowers must ultimately pay.

The result nationwide has been that tens, maybe hundreds, of thousands of people have walked away from their homes and turned them over to banks that were not prepared to handle the flood of loan defaults and foreclosures.

The big banks are now learning that it costs much more in the long run when homeowners walk away and leave properties vacant than it does if they write off a portion of the loans and keep people in their homes.

Banks “have always been able to do short sales,” said UNI’s Cox. “They’ve just been reluctant to.”

Short sales require a lot of paperwork

ReMax agent Torres has handled short sales resulting in mortgage write-offs of as little as $10,000 and as much as $500,000. He said there are currently about 230 short sales in process in the metro area, where about 1,500 homes are in pre-foreclosure, meaning the owners have missed at least one payment.

Knapp estimates that 10 to 15 percent of the home sales that Iowa Realty handles are short sales.

It’s not easy for a homeowner to do a short sale, Torres said. But it is less of a headache now than it was a couple of years ago.

Some banks — Torres cites Bank of America as an example — are easier to deal with on a short sale today than they were a few years ago, because the banks are now more familiar with the procedure.

Others banks — Wells Fargo and Chase are two examples, Torres cited — are still slow to process short-sale paperwork, but even they are more open to the idea than they were in the past.

The key to persuading lenders to do a short sale is convincing them that the borrower is insolvent, Torres said.

Homeowners who do short sales “have to be in a hardship. It can’t just be someone who says: ‘I don’t want to pay my mortgage anymore,’ ” he said.

“In most cases, it’s because of a job loss, medical situation or divorce,” Torres said.

“There is a ridiculous amount of paperwork that has to be submitted to the bank,” he said. “There’s financial statements. There’s tax returns. There has to be a hardship letter, numerous affidavits and disclosures.”

After financial hardship has been proved, he said, “the bank sends out an appraiser to determine the fair market value, and that is what is used to accept the short sale offer, or to counter with an amount they will accept.”

Short sales alone will not solve the current housing dilemma, said UNI’s Cox, “but they are a piece of the puzzle.”


written by David Elbert.