The Federal "Making Home Affordable" Program

More news just out this morning from President Obama and the U.S. Treasury on the new Making Home Affordable program. It is responding to a phenomenon that Treasury describes as falling prices of innocent homeowners near a foreclosure. ("Prices of homes near a foreclosure are declining as much as 9%.) If that happens, then an otherwise strong homeowner can go "underwater" and thereby end up in foreclosure as well. Treasury says this can become an accelerating downhill spiral dive for entire communities, then the nation.

The Program's stated purpose is "A Refinance Program for Responsible Homeowners Suffering From Falling Home Prices." It is what you'll hear as the "cram-down" bill, when referring to the mortgage industry's reaction to it. The U.S. Treasury's FAQ released this morning states that it will help reduce the loan obligations for 3 to 4 million homeowners, at a cost of about $75 billion. As I read it, it requires lenders to perform a "net present value" analysis on loans, and if the expected payments from a homeowner (who might otherwise be forced in to foreclosure) are greater if re-financed on easier terms, then the lender must go along (if certain other requirements are met).

If you have questions about this program or any of the others, feel free to give me a call. I'll be glad to help. -Lee