Monday, March 1, 2010

MBA Announces a "Bridge to HAMP"

The MBA (Mortgage Bankers Association) has announced their support for a new federally funded program to extend forbearance on delinquent home loans. MBA along with the White House, US Treasury, Fannie Mae/Freddie Mac, and HUD have collaborated to bring US housing markets more relief from harsh economic realities facing the real estate industry.

Under the new program, borrowers (including those on unemployment) would be responsible for payments equal to 31% of any reported household income above $300 monthly.

The Press Release:

"Under MBA's proposal, loan servicers that participate in this program would reduce monthly payments to an affordable level based on household income. Borrowers would be initially evaluated for the forbearance program using a model that assumes the borrower will be reemployed within nine months of losing his or her job at 75 percent of the borrower's previous salary."

The Details:

"Unemployment Benefits – Borrowers must apply for unemployment benefits when eligible. Borrowers must have nine months of unemployment available to be eligible for nine months of forbearance."

"Savings – Verification of liquid assets is required before entering into the second phase." "However, if 31 percent of household income is less than $300, guidelines would suggest no payment is required during the first phase of the forbearance."

The dark real estate reality from Paul Jackson who attended the MBA announcement:

The shock and dismay from many servicers in the audience was actually audible, and I saw plenty of executives shaking their heads in collective dismay. Not because they don’t want to help troubled borrowers, mind you – but because they understood what capitulation looked like when they saw it."

"But the servicer isn’t on their own in this proposal: servicers would have access to a mutant cousin of the FED discount window, called a Low Cost Advancing Vehicle (LCAV), which would see the U.S. Treasury “supply reasonable funds at a fixed rate to participating mortgage servicers to facilitate advances of principal, interest, taxes and insurance for the extended forbearance period."