Homeowner Affordability and Stability Plan

Here is the plan that was outlined by the President of the USofA

This is another government idea that we will never see the end of.. you and I will be paying for and where will it end.  Maybe make the incentive for those that are not in foreclosure thus stimulating the economy. Giving those in good standing the monetary capability to purchase the Bank owned homes and release them with low rents for property owners that need a home to live but can't purchase.

Just a though,

Brad Bergamini



February 18, 2009


Homeowner Affordability and Stability Plan

Fact Sheet

The deep contraction in the economy and in the housing market has created devastating

consequences for homeowners and communities throughout the country. Millions of responsible

families who make their monthly payments and fulfill their obligations have seen their property

values fall, and are now unable to refinance to lower mortgage rates. Meanwhile, millions of

workers have lost their jobs or had their hours cut, and are now struggling to stay current on their

mortgage payments. As a result, as many as 6 million families are expected to face foreclosure in

the next several years, with millions more struggling to stay current on their payments.

The present crisis is real, but temporary. As home prices fall, demand for housing will increase,

and conditions will ultimately find a new balance. Yet in the absence of decisive action, we risk

an intensifying spiral in which lenders foreclose, pushing home prices still lower, reducing the

value of household savings, and making it harder for all families to refinance. In some studies,

foreclosure on a home has been found to reduce the prices of nearby homes by as much as 9

percent – creating the potential that even borrowers who make every payment suffer from an

increase in foreclosures in their community.

The Obama Administration's Homeowner Affordability and Stability Plan will offer assistance to

as many as 7 to 9 million homeowners making a good-faith effort to stay current on their

mortgage payments, while attempting to prevent the destructive impact of foreclosures on

families and communities. It will not provide money to speculators, and it will target support to

the working homeowners who have made every possible effort to stay current on their mortgage

payments. Just as the American Recovery and Reinvestment Act works to save or create several

million new jobs and the Financial Stability Plan works to get credit flowing, the Homeowner

Affordability and Stability Plan will support a recovery in the housing market and ensure that

these workers can continue paying off their mortgages.

By supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac,

providing up to 4 to 5 million homeowners with new access to refinancing and enacting a

comprehensive stability initiative to offer reduced monthly payments for up to 3 to 4 million at risk

homeowners, this plan – which draws off the best ideas developed within the Administration,

as well as from Congressional housing leaders and Federal Deposit Insurance Corporation Chair

Sheila Bair – brings together the government, lenders and borrowers to share responsibility

towards ensuring working Americans can afford to stay in their homes.



February 18, 2009


Homeowner Affordability and Stability Plan

1. Refinancing for Responsible Homeowners Suffering From Falling Home Prices

2. A Comprehensive $75 Billion Homeowner Stability Initiative

􀂃 A Loan Modification Plan To Reach 3 to 4 Million Homeowners

o Shared Effort with Lenders to Reduce Interest Payments

o Incentives to Servicers and Borrowers

􀂃 Clear and Consistent Guidelines for Loan Modifications

􀂃 Required Participation By Financial Stability Plan Participants

􀂃 Modifications of Home Mortgages During Bankruptcy

􀂃 Strengthen Hope for Homeowners and Other FHA Loan Programs

􀂃 Support Local Communities and Help Displaced Renters

3. Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac



February 18, 2009


1. Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From

Falling Home Prices:

Provide the Opportunity for Up to 4 to 5 Million Responsible Homeowners

Expected to Refinance: Mortgage rates are currently at historically low levels,

providing homeowners with the opportunity to reduce their monthly payments by

refinancing. But under current rules, most families who owe more than 80 percent of

the value of their homes have a difficult time securing refinancing. (For example, if a

borrower's home was worth $200,000, he or she would have limited refinancing

options if he or she owed more than $160,000.) Yet millions of responsible

homeowners who put money down and made their mortgage payments on time have

– through no fault of their own – seen the value of their homes drop low enough to

make them unable to access these lower rates. As a result, the Obama Administration

is announcing a new program that will provide the opportunity for 4 to 5 million

responsible homeowners who took out conforming loans owned or guaranteed by

Freddie Mac and Fannie Mae to refinance through the two institutions over time.

Reducing Monthly Payments: For many families, a low-cost refinancing could

reduce mortgage payments by thousands of dollars per year. For example, consider a

family that took a 30-year fixed rate mortgage of $207,000 with an interest rate of

6.50% on a house worth $260,000 at the time. Today, that family has $200,000

remaining on their mortgage, but the value of that home has fallen 15 percent to

$221,000 – making them ineligible for today's low interest rates that generally

require the borrower to have 20 percent home equity. Under this refinancing plan,

that family could refinance to a rate near 5.16% – reducing their annual payments by

over $2,300.

2. A $75 Billion Homeowner Stability Initiative to Prevent Foreclosures and Help

Responsible Families Stay in Their Homes: The Treasury Department, working with the

GSEs, FHA, the FDIC and other federal agencies, will undertake a comprehensive multi-part

strategy to prevent millions of foreclosures and help families stay in their homes. This

strategy includes the following five features:

A Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk


Clear and Consistent Guidelines for Loan Modifications

Requiring That Financial Stability Plan Recipients Use Guidance for Loan


Allowing Judicial Modifications of Home Mortgages During Bankruptcy When A

Borrower Has No Other Options

Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the

FDIC, the Federal Reserve and HUD to Monitor Performance



February 18, 2009


Strengthening FHA Programs and Providing Support for Local Communities

A. A Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners:

This initiative is intended to reach millions of responsible homeowners who are

struggling to afford their mortgage payments because of the current recession, yet cannot

sell their homes because prices have fallen so significantly. In the current economy, in

which 3.6 million jobs have been lost over the past 14 months, millions of hard-working

families have seen their mortgage payments rise to 40 or even 50 percent of their monthly

income – particularly if they received subprime and exotic loans with exploding terms

and hidden fees. The Homeowner Stability Initiative operates through a shared

partnership to temporarily help those who commit to make reasonable monthly mortgage

payments to stay in their homes, providing families with security and neighborhoods with

stability. This plan will also help to stabilize home prices for homeowners in

neighborhoods hardest hit by foreclosures. Based on estimates concerning the

relationship between foreclosures and home prices, with the average house in the U.S.

valued around $200,000, the average homeowner could see his or her home value

stabilized against declines in price by as much as $6,000 relative to what it would

otherwise be absent the Homeowner Stability Initiative.

Who the Program Reaches:

􀂃 Focusing on Homeowners At Risk: Anyone with high combined mortgage debt

compared to income or who is "underwater" (with a combined mortgage balance

higher than the current market value of his house) may be eligible for a loan

modification. This initiative will also include borrowers who show other indications

of being at risk of default. Eligibility for the program will sunset at the end of three


􀂃 Reaching Homeowners Who Have Not Missed Payments: Delinquency will not be a

requirement for eligibility. Rather, because loan modifications are more likely to

succeed if they are made before a borrower misses a payment, the plan will include

households at risk of imminent default despite being current on their mortgage


􀂃 Common Sense Restrictions: Only owner-occupied homes qualify; no home

mortgages larger than the Freddie/Fannie conforming limits will be eligible. This

initiative will go solely to supporting responsible homeowners willing to make

payments to stay in their home – it will not aid speculators or house flippers.

􀂃 Special Provisions for Families with High Total Debt Levels: Borrowers with high

total debt qualify, but only if they agree to enter HUD-certified consumer debt

counseling. Specifically, homeowners with total "back end" debt (which includes not

only housing debt, but other debt including car loans and credit card debt) equal to

55% or more of their income will be required to agree to enter a counseling program

as a condition for a modification.


How the Program Works



February 18, 2009


• The Homeowner Stability Initiative has a simple goal: reduce the amount

homeowners owe per month to sustainable levels. This program will bring together

lenders, servicers, borrowers, and the government, so that all stakeholders share in

the cost of ensuring that responsible homeowners can afford their monthly mortgage

payments – helping to reach up to 3 to 4 million at-risk borrowers in all segments of

the mortgage market, reducing foreclosures, and helping to avoid further downward

pressures on overall home prices. The program has several key components:

I. Shared Effort to Reduce Monthly Payments: Treasury will partner with

financial institutions to reduce homeowners' monthly mortgage payments.

- The lender will have to first reduce interest rates on mortgages to a

specified affordability level (specifically, bring down rates so that

the borrower's monthly mortgage payment is no greater than 38% of

his or her income).

- Next, the initiative will match further reductions in interest payments

dollar-for-dollar with the lender, down to a 31% debt-to-income ratio

for the borrower.

- To ensure long-term affordability, lenders will keep the modified

payments in place for five years. After that point, the interest rate can

be gradually stepped-up to the conforming loan rate in place at the

time of the modification. Note: Lenders can also bring down

monthly payments to these affordability targets through reducing the

amount of mortgage principal. The initiative will provide a partial

share of the costs of this principal reduction, up to the amount the

lender would have received for an interest rate reduction.

ii. "Pay for Success" Incentives to Servicers: Servicers will receive an up-front

fee of $1,000 for each eligible modification meeting guidelines established

under this initiative. Servicers will also receive "pay for success" fees –

awarded monthly as long as the borrower stays current on the loan – of up to

$1,000 each year for three years.

iii. Responsible Modification Incentives: Because loan modifications are more

likely to succeed if they are made before a borrower misses a payment, the

plan will include an incentive payment of $1,500 to mortgage holders and

$500 for servicers for modifications made while a borrower at risk of

imminent default is still current.

iv. Incentives to Help Borrowers Stay Current: To provide an extra incentive

for borrowers to keep paying on time under the modified loan, the initiative

will provide a monthly balance reduction payment that goes straight towards

reducing the principal balance on the mortgage loan. As long as the borrower

stays current on his or her payments, he or she can get up to $1,000 each year

for five years.



February 18, 2009


v. Home Price Decline Reserve Payments: To encourage lenders to modify

more mortgages and enable more families to keep their homes, the

Administration -- together with the FDIC -- has developed an innovative

partial guarantee initiative. The insurance fund – to be created by the

Treasury Department at a size of up to $10 billion – will be designed to

discourage lenders from opting to foreclose on mortgages that could be

viable now out of fear that home prices will fall even further later on. This

initiative provides lenders with the security to undertake more mortgage

modifications by assuring that if home price declines are worse than

expected, they have reserves to fall back on. Holders of mortgages modified

under the program would be provided with an additional insurance payment

on each modified loan, linked to declines in the home price index. These

payments could be set aside as reserves, providing a partial guarantee in the

event that home price declines – and therefore losses in cases of default – are

higher than expected.

How It Will Be Effective

􀂃 Protecting Taxpayers: To protect taxpayers, the Homeowner Stability Initiative will

focus on sound modifications. If the total expected cost of a modification for a lender

taking into account the government payments is expected to be higher than the direct

costs of putting the homeowner through foreclosure, that borrower will not be

eligible. For those borrowers unable to maintain homeownership, even under the

affordable terms offered, the plan will provide incentives to encourage families and

lenders to avoid the costly foreclosure process and minimize the damage that

foreclosure imposes on lenders, borrowers and communities alike. Moreover,

Treasury will not provide subsidies to reduce interest rates on modified loans to

levels below 2%.

􀂃 Counseling and Outreach to Maximize Participation: Under the plan, the

Department of Housing and Urban Development will also make available funding for

non-profit counseling agencies to improve outreach and communications, especially

to disadvantaged communities and those hardest-hit by foreclosures and vacancies.

􀂃 Creating Proper Oversight and Tracking Data to Ensure Program Success: Fannie

Mae and Freddie Mac will be responsible – subject to Treasury's oversight and the

Federal Housing Finance Agency's conservatorship – for monitoring compliance by

servicers with the program. Every servicer participating in the program will be

required to report standardized loan-level data on modifications, borrower and

property characteristics, and outcomes. The data will be pooled so the government

and private sector can measure success and make changes where needed. Treasury

will meet quarterly with the FDIC, the Federal Reserve, the Department of Housing

and Urban Development and the Federal Housing Finance Agency to ensure that the

program is on track to meeting its goals.

􀂃 Limiting the Impact of Foreclosure When Modification Doesn't Work: Lenders

will receive incentives to take alternatives to foreclosures, like short sales or taking of

deeds in lieu of foreclosure. Treasury will also work with the GSEs to provide data




February 18, 2009


on foreclosed properties to streamline the process of selling or redeveloping them,

thereby ensuring that they do not remain vacant and unsold.

B. Clear and Consistent Guidelines for Loan Modifications: A lack of common standards

has limited loan modifications, even when they are likely to both reduce the chance of

foreclosure and raise the value of the securities owned by investors. Mortgage servicers –

who should have an interest in instituting common-sense loan modifications – often

refrain from doing so because they fear lawsuits. Clear and consistent guidelines for

modifications are a key component of foreclosure prevention.


􀂃 Developing Clear and Consistent Guidelines for Loan Modifications: Working with

the FDIC, other federal banking and credit union regulators, the FHA and the Federal

Housing Finance Agency, the Administration is in process of developing guidelines

for sustainable mortgage modifications for all federal agencies and the private sector

– bringing order and consistency to foreclosure mitigation. The guidelines will

include detailed protocols for loss mitigation as well for identifying borrowers at risk

of default; the Administration expects to announce these guidelines by Wednesday,

March 4th

􀂃 Applying Guidelines Across Government and the Private Sector: Treasury will

develop uniform guidance for loan modifications across the mortgage industry by

working closely with the FDIC and other bank agencies and building on the FDIC's

pioneering role in developing a systematic loan modification process last year. The

Guidelines – to be posted online – will be used for the Administration's new

foreclosure prevention plan. Moreover, all financial institutions receiving Financial

Stability Plan financial assistance going forward will be required to implement loan

modification plans consistent with Treasury guidance. Fannie Mae and Freddie Mac

will use these guidelines for loans that they own or guarantee, and the Administration

will work with regulators and other federal and state agencies to implement these

guidelines across the entire mortgage market. The agencies will seek to apply these

guidelines when permissible and appropriate to all loans owned or guaranteed by the

federal government, including those owned or guaranteed by Ginnie Mae, the Federal

Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans' Affairs

and the Department of Agriculture. In addition, these guidelines will apply to loans

owned or serviced by insured financial institutions supervised by the Office of the

Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve,

the Federal Deposit Insurance Corporation and the National Credit Union


C. Requiring All Financial Stability Plan Recipients to Use Guidance for Loan

Modifications: As announced last week, the Treasury Department will require all

Financial Stability Plan recipients going forward to participate in foreclosure mitigation

plans consistent with Treasury's loan modification guidelines.

D. Allowing Judicial Modifications of Home Mortgages During Bankruptcy for

Borrowers Who Have Run Out of Options: The Obama administration will seek careful

changes to personal bankruptcy provisions so that bankruptcy judges can modify

mortgages written in the past few years when families run out of other options.




February 18, 2009


How Judicial Modification Works: When an individual enters personal bankruptcy

proceedings, his mortgage loans in excess of the current value of his property will

now be treated as unsecured. This will allow a bankruptcy judge to develop an

affordable plan for the homeowner to continue making payments. To receive judicial

modifications in bankruptcy, homeowners must first ask their servicers/lenders for a

modification and certify that they have complied with reasonable requests from the

servicer to provide essential information. This provision will apply only to existing

mortgages under Fannie Mae and Freddie Mac conforming loan limits, so that

millionaire homes don't clog the bankruptcy courts.

Bolster FHA and VA Authority to Protect Investors and Ensure Loan

Modifications Occur: Legislation will provide the FHA and VA with the authority

they need to provide partial claims in the event of bankruptcy or voluntary

modification so that holders of loans guaranteed by the FHA and VA are not


E. Strengthening FHA Programs and Providing Support for Local Communities

Ease Restrictions in Federal Housing Administration Programs, Including Hope

for Homeowners: The Hope for Homeowners program offers one avenue for

struggling borrowers to refinance their mortgages. In order to ensure that more

homeowners participate, the FHA will reduce fees paid by borrowers, increase

flexibility for lenders to modify troubled loans, permit borrowers with higher debt

loads to qualify, and allow payments to servicers of the existing loans.

Strengthening Communities Hardest Hit by the Financial and Housing Crises: As

part of the recovery plan signed by the President, the Department of Housing and

Urban Development will award $2 billion in competitive Neighborhood Stabilization

Program grants for innovative programs that reduce foreclosure. Additionally, the

recovery plan includes an additional $1.5 billion to provide renter assistance,

reducing homelessness and avoiding entry into shelters

3. Support Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie


Ensuring Strength and Security of the Mortgage Market: Today, using funds

already authorized in 2008 by Congress for this purpose, the Treasury Department is

increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the

strength and security of the mortgage market and to help maintain mortgage


o Provide Forward-Looking Confidence: The increased funding will enable

Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure

mortgage affordability for responsible homeowners, and provide forward-looking

confidence in the mortgage market.

o Treasury is increasing its Preferred Stock Purchase Agreements to $200

billion each from their original level of $100 billion each.



February 18, 2009


Promoting Stability and Liquidity: In addition, the Treasury Department will

continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to

promote stability and liquidity in the marketplace.

Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie

Mac can continue to provide assistance in addressing problems in the housing

market, Treasury will also be increasing the size of the GSEs' retained mortgage

portfolios allowed under the agreements – by $50 billion to $900 billion – along with

corresponding increases in the allowable debt outstanding.

Support State Housing Finance Agencies: The Administration will work with

Fannie Mae and Freddie Mac to support state housing finance agencies in serving


No EESA or Financial Stability Plan Money: The $200 billion in funding

commitments are being made under the Housing and Economic Recovery Act and do

not use any money from the Financial Stability Plan or Emergency Economic

Stabilization Act/TARP.


Brad Bergamini


The Bergamini Group

Realty Executives Northern Arizona

503 East Gurley Street

Prescott, Arizona 86301

Email: Brad@WelcomeToPrescott.com 

Web: WelcomeToPrescott.com 

Group: 928.237.4400

Main: 928.777.0257 ext 43

Cell:  928.533.1633

Fax:  928.237.4401

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." --Warren Buffett

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