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From Banking and Finance Law Daily, July 26, 2016

White paper discusses the future of foreclosure prevention programs

By Stephanie K. Mann, J.D.

The Department of Treasury, Department of Housing and Urban Development, and Federal Housing Finance Agency have released a white paper designed to serve as a guide for future loss mitigation programs that draw on the lessons learned from implementing the government’s crisis-era housing recovery programs.

The white paper outlines five principles that the agencies believe were essential to the success of the government’s programs and should provide a foundation for any future loss mitigation programs. The principles are:

  • Accessibility: ensuring that there is a simple process in place for homeowners to seek mortgage assistance and that as many homeowners as possible are able to easily obtain the needed and appropriate level of assistance.
  • Affordability: providing homeowners with meaningful payment relief that addresses the needs of the homeowner, the servicer, and the investor to support long-term performance.
  • Sustainability: offering solutions designed to resolve the delinquency and be effective long-term for the homeowner, servicer, and investor.
  • Transparency: ensuring that the process to obtain assistance, and the terms of that assistance, are as clear and understandable as possible to homeowners, and that information about options and their utilization is available to the appropriate parties.
  • Accountability: ensuring that there is an appropriate level of oversight of the process to obtain mortgage assistance.

Foreclosure prevention. Over the past seven years, the foreclosure prevention programs established by Treasury, HUD, and FHFA have transformed the way in which the mortgage servicing industry has interacted with and assisted struggling homeowners. Since April 2009, 10.5 million modification and mortgage assistance arrangements were completed through government programs and private sector efforts.

Additionally, Making Home Affordable and other homeowner assistance programs resulted in improved homeowner engagement in the loss mitigation process. According to the white paper, the programs also supported the recovery of the housing market and demonstrated that a mortgage modification can be a sustainable option for homeowners seeking to avoid foreclosure.

What’s next? Going forward, Treasury, HUD, and FHFA have committed to engaging with a variety of stakeholders—particularly mortgage servicers—to assess how foreclosure alternative options will incorporate and develop the core principles outlined in the white paper.

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