Yesterday the Obama Administration announced details of new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program which include; Integration of Hope for Homeowners to Help Underwater Borrowers Regain Equity, and the Parallel Second Lien Program.
These latest announcements will make it easier for borrowers to modify or refinance their loans under FHA’s Hope for Homeowners Program. The Federal Housing Commissions, Hope for Homeowners, requires the holder of the mortgage to accept a payoff below the current market value of a home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home’s market value takes a borrower from a position of being underwater to having equity.
Under the changes made yesterday, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing.
The Second Lien Program announced will work in tandem with first lien modifications offered under the Home Affordable Modification Program to provide a solution for struggling borrowers. Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when the first lien is modified.