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How It Will Be Effective
- Protecting Taxpayers and Communities: To protect taxpayers, the Home Affordable
Modification programwill focus on sound modifications. No payments will be made unless the
modification lasts for at least three months, and all the payments are designed around the
principal of “pay for success.” Borrowers, servicers and lenders/investors all have aligned
incentives under the program to get successful modifications at an affordable and sustainable level.
- 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. Borrowers with high debt-to-income levels must agree to use counseling
services.
- 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: Servicers will
receive incentives to take alternatives to foreclosures, like short sales or taking of deeds in
lieu of foreclosure. For those borrowers unable to maintain homeownership, even under the affordable
terms offered, the plan will provide incentives to encourage families and servicers to avoid the
costly foreclosure process and minimize the damage that foreclosure imposes on financial institutions,
borrowers and communities alike. Servicers will be eligible for a payment of $500 and can make
reimbursable payments up to $1000 to extinguish other liens, and borrowers are eligible for a
payment of $1500 in relocation expenses in order to effectuate short sales and deeds-in-lieu of
foreclosure. Such methods reduce vacancy, neighborhood decline, and overall costs for financial
institutions, borrowers, and affected communities alike.
- Treasury will also work with the GSEs to provide data on foreclosed properties to streamline
the process of selling or redeveloping them, thereby ensuring that they do not remain vacant and unsold.
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