Date Published | 1/10/2012 |
Author | Marja Hoek-Smit |
Theme | |
Country | United States |
Specifically, it proposes actions that may expose Fannie Mae
and Freddie Mac to greater credit risk and near-term losses, but might be in
the interest of taxpayers “if those actions result in a quicker and more
vigorous economic recovery.” The government-sponsored enterprises (GSEs) hold
or guarantee significant shares of delinquent mortgages and foreclosed
properties and their actions affect therefore not only their own portfolios,
but the housing market overall. Proposals focus on three main areas:
-Actions
aimed at homeowners at risk of default or foreclosure. The study proposes
further adjustments to the current Home Affordable Refinance Program (HARP) to
increase participation rates. It further suggests its expansion to non-GSE,
non-FHA loans that would otherwise be eligible for the HARP program. For
mortgages that are not-eligible for refinancing because they are already
delinquent or have been sufficiently delinquent in the past, the report
suggests changes to the current Home Affordable Modification Program (HAMP)
that provides incentives to lenders, servicers and borrowers to facilitate loan
modifications. Suggestions include allowing lower debt-to-income ratios and
including a broader set of borrower expenses in the DTI equation and including
payment deferral options for unemployed borrowers; focusing on reducing payments
for underwater borrowers who are current rather than reducing principle per se.
In cases where foreclosure is inevitable, alternative solutions such as short
sale or deed-in-lieu of foreclosure may be considered.
-Ideas for
improving mortgage servicing practices. The study proposes changes in the
standard servicing compensation model that would allow for differentiation
according to actual costs across performing and delinquent loans and the
creation of an on-line standardized registry of liens to improve information on
housing debt.