Funding will help make mortgages more affordable
March 26, 2010
Washington, D.C. – Nevada Senator Harry Reid today applauded the administration’s announcement of a new initiative that will provide much-needed relief to responsible Nevada homeowners who are underwater and struggling to make payments on their mortgage. Adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs give mortgage servicers the incentive and flexibility to help homeowners who owe more on their mortgage than their home is worth by modifying their loan, or refinancing it with an FHA-backed loan, to prevent avoidable foreclosures.
“For months I have been in discussions with Secretaries Geithner and Donovan about the importance of providing more support for homeowners in Nevada, and I am pleased that the Obama Administration has responded,” Reid said. “These program changes will help make it easier for responsible homeowners to modify their loans and avoid foreclosure.”
“Senator Reid’s leadership has been critical in helping to find additional solutions for ‘underwater’ borrowers,” said HUD Secretary Shaun Donovan. “Senator Reid is a strong advocate for the people of Nevada and his recommendations were very valuable as we developed these initiatives, which will offer Nevada's homeowners more options for staying in their homes.”
Senator Reid has been in constant contact with Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan, advocating the need to do more to help Nevada homeowners who are struggling with negative equity in their homes. Secretary Donovan responded earlier this year by dispatching additional staff to HUD’s Las Vegas office, including a foreclosure SWAT team to help Nevadans facing the threat of losing their home. Today’s announcement is another consequence of those discussions.
Private institutions and $50 billion in Troubled Asset Relief Program (TARP) funds allocated for housing programs will cover the costs of adjustments to these programs. Under the changes to HAMP, mortgage servicers now will be required to place principal reduction on equal footing with interest-rate reductions when modifying mortgages in order to receive incentives. The FHA program will allow home owners to refinance into FHA-backed mortgage if FHA-eligibility requirements are met and servicers agree to reduce total mortgage principal to 115 percent of the home’s value. Importantly, this program establishes incentives to second-lien holders to also reduce mortgage principal.