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From Banking and Finance Law Daily, May 30, 2013

Loan Modification Program Extended Until 2015

By John M. Pachkowski, J.D.

The Treasury Department has announced an extension of the Obama Administration’s Making Home Affordable Program through Dec. 31, 2015. The new deadline was determined in coordination with the Federal Housing Finance Agency (FHFA) to align with extended deadlines for the Home Affordable Refinance Program (HARP) and the Streamlined Modification Initiative for homeowners with loans owned or guaranteed by Fannie Mae and Freddie Mac.

Strengthen the middle class. “The housing market is gaining steam, but many homeowners are still struggling,” said Treasury Secretary Jacob J. Lew. “Helping responsible homeowners avoid foreclosure is part of our wide-ranging efforts to strengthen the middle class, and Making Home Affordable offers homeowners some of the deepest and most dependable assistance available to prevent foreclosure. Extending the program for two years will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry.”

Commenting on the extension, FHFA Acting Director Edward J. DeMarco noted, “These extensions keep two valuable foreclosure prevention programs available to those who need them. The extensions also align the end date for three key assistance programs that were developed in response to the housing crisis.”

Relief to homeowners. In its announcement, the Treasury Department pointed out that, since its launch in March 2009, about 1.6 million actions have been taken through the program to provide relief to homeowners and nearly 1.3 million homeowners have been helped directly by the program. The Making Home Affordable Program includes the Home Affordable Modification Program (HAMP), which modifies the terms of a homeowner’s mortgage to reduce their monthly payment to prevent foreclosure. As of March 2013, more than 1.1 million homeowners have received a permanent modification of their mortgage through HAMP, with a median savings of $546 every month—or 38 percent of their previous payment.

The FHFA also noted that, since late 2008, Fannie Mae and Freddie Mac have completed more than 2.7 million foreclosure prevention actions. Approximately half of these actions are permanent loan modifications, including more than 435,000 permanent HAMP modifications. With the extensions announced today, these numbers are expected to grow as borrowers continue to benefit from these programs.

Strong opposition. Financial Services Committee Chairman Jeb Hensarling (R-Texas) expressed his strong opposition to President Obama’s decision to extend HAMP, calling it “a failed and costly program that has been shown to actually hurt struggling homeowners.”

“This decision solidifies the Obama administration’s place atop the list of the nation’s biggest subprime lenders,” said Hensarling. “HAMP is a costly and abject failure that takes money from hardworking taxpayers, bails out banks that made bad loans, and forces Americans who struggle to pay their own mortgages to also pay their neighbor’s. The TARP inspector general, the Government Accountability Office, the Congressional Oversight Panel—all have confirmed that HAMP has not only failed to work but it actually hurts struggling homeowners.”

He continued, “The Obama administration promised the program would help up to 4 million homeowners, yet it has come nowhere close to that goal. Only 862,000 active permanent mortgage modifications have taken place through HAMP since the program began in 2009.” Hensarling also noted that the Special Inspector General for the Troubled Asset Relief Program reports that the number of homeowners who have redefaulted on a HAMP permanent mortgage modification is increasing “at an alarming rate.”

Companies: Fannie Mae; Freddie Mac

MainStory: TopStory BankingOperations GovernmentSponsoredEnterprises Loans Mortgages

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