In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, January 27, 2012

Government to triple HAMP payments for principal reductions

by Calculated Risk on 1/27/2012 09:03:00 PM

From Jon Prior at HousingWire: Treasury to pay investors triple for HAMP principal reductions

The Treasury Department will triple payments to mortgage investors for reducing borrower principal through an expanded Home Affordable Modification Program announced Friday [CR note: Treasury will pay incentives ranging from .18 to .63 cents on the dollar - depending on the change in LTV]

Officials announced several critical changes to HAMP, including an enrollment extension to Dec. 31, 2013, from its original expiration date at the end of this year.

The Treasury will also require servicers to factor in second liens and other obligations in the debt-to-income ratio calculation. Previously, if a borrower's first-lien mortgage monthly payment was below 31% of the income, the borrower was deemed ineligible. Factoring other debts to the DTI evaluation will expand the pool of borrowers who could receive the assistance.

To combat blight, officials said they would also expand HAMP to investors who are renting properties to tenants.
Department of Housing and Urban Development Secretary Shaun Donovan said in the conference call Friday that the Treasury would make these payments to Fannie Mae and Freddie Mac if they participate in the principal reduction program.

To date, the GSEs have not committed to such a program.
"FHFA’s assessment of the investor incentives now being offered will follow its previous analysis, including consideration of the eligible universe, operational costs to implement such changes, and potential borrower incentive effects," said FHFA Acting Director Edward DeMarco in a statement Friday.
Based on DeMarco's comments, it doesn't sound like Fannie and Freddie will participate in the principal reductions.