Read Here Official Documents from the Goverment
(No bias, no comments. You make your own conclusions)

Additional Funding for Some States
High Unemployment and Low Prices

President Obama Announces Funding to Help Address Urgent Problems Facing Families in States with High Unemployment and Where Home Prices Have Fallen the Furthest

Release on February 19,2010 ( Published in Making Home Affordable )

Today, President Obama announced $1.5 billion in funding for innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble. In each of these states, the average price for all homes in the state has fallen more than 20% from the peak. Home prices across the country are beginning to stabilize since the Administration’s economic policies began to take effect in mid-2009. But the legacy of price declines, together with the effects of high unemployment, means that many working and middle-class families in these especially hard-hit areas are facing serious challenges, in many cases beyond what their families’ resources can handle.

President Obama recognizes the challenges facing our families in the nation’s housing markets, where local conditions vary considerably. The Administration is setting up an innovation fund to work with housing finance agencies in the hardest-hit areas, so that those states and localities can further respond to the most pressing problems in their communities.

Help for the Hardest-Hit Housing Markets

$1.5 Billion to Work with State Housing Agencies to Innovate and Help Address the Problems Facing the Hardest-Hit Housing Markets
There will be a formula for allocating funding among eligible states that will be based on home price declines and unemployment.
HFAs must submit a program design to Treasury.
Programs may include:
Measures for unemployed homeowners;
Programs to assist borrowers owing more than their home is now worth;
Programs that help address challenges arising from second mortgages; or
Other programs encouraging sustainable and affordable homeownership.
Accountability and Transparency for these Housing Programs
All funded program designs posted online.
Accountability for results – program effectiveness measured and results published online.
Effective oversight under the Emergency Economic Stabilization Act of 2008.

Help for the Hardest Hit Housing Markets

President Obama today is announcing Help for the Hardest Hit Housing Markets. The program will apply to states that have suffered an average home price drop of over 20% from the peak. State and local Housing Finance Agencies (HFAs) in each state are already familiar with the urgent challenges facing their communities and have demonstrated the ability to address these challenges. For that reason, we will work with these HFAs to expand the capacity to help address these challenges, with $1.5 billion from the funds set aside for housing under the Emergency Economic Stabilization Act of 2008 (EESA).

The HFAs will determine the priorities facing their local markets. The program will be under strict transparency and accountability rules. The increase in HFA activities in these areas will support families in these markets, combining with the numerous other steps the Administration has taken to address housing markets.

Funds can be used for innovation to take steps to address difficult, locally-important challenges for the hardest-hit housing markets, including unemployed borrowers, underwater borrowers, and second liens.

Programs must meet funding requirements under EESA. These include that the recipient of funds must be an eligible financial institution and that the funds must be used to pay for mortgage modifications or for other permitted uses under EESA. Treasury will announce maximum state level allocations in the next two weeks, along with rules governing the submission of program designs by HFAs, and provide a period thereafter for HFAs to submit their program designs in order to receive funding.

Illustrations of the Sorts of Programs that May be Funded in the States

Housing markets vary considerably from state to state, and often within a single state. Housing Finance Agencies are intimately engaged already in their local housing markets, and will play the lead role in determining what sorts of programs are most appropriate to local conditions. Three sorts of problems that may be addressed with funding are unemployed borrowers, underwater borrowers, and second liens:

1. Unemployed borrowers. Since the recession began in 2008, unemployment has hit many families who own homes. In previous times, when house prices were rising, families with unemployment could often sell their homes for more than they had paid, using the proceeds to tide them over.

Today, by contrast, families in states where prices have dropped more than 20% often find themselves owing more than the house is worth in the current market. Such homes are often difficult to sell, and families with unemployment often can’t pay the current mortgage and may not have enough income to qualify for a modification.

In such circumstances, one use of funds would be for HFAs to begin programs to help unemployed homeowners until they have secured a new job. HFAs can consider a variety of programs to help unemployed borrowers.

2. Underwater borrowers. For states with more than 20% home price declines, a large portion of homeowners are “underwater” -- they owe more than the house is worth in the current market. Such borrowers often find it difficult to sell their homes -- lenders may not agree to a sale that fails to pay back a mortgage in full. HFAs may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages.

3. Second liens. An important challenge can arise for some borrowers who have a home equity line of credit or other second mortgage on their home. Often, a first mortgage lender who may be willing to modify the loan by reducing principal can run into difficulties in coordinating between the first and second mortgage lender. To smooth this coordination problem, and help assure that homeowners get an overall modification that works best, funds can be used to pay incentives to the second mortgage holders, addressing this potential obstacle to reducing principal and keeping borrowers in their homes.

Making Home Affordabe
Obama Mortgage Plan

BORROWER FREQUENTLY ASKED QUESTION
Revised March 18,2009

What is “Making Home Affordable" all about?

Making Home Affordable is part of President Obama's comprehensive strategy to get the housing market back on track. Through the Making Home Affordable Program, up to 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

HOME AFFORDABLE REFINANCE

1. I'm current on my mortgage. Will the Home Affordable Refinance help me?

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through the Home Affordable Refinance Program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.

2. How do I know if I am eligible?

You may be eligible if:
• You are the owner occupant of a one to four unit home,
• The loan on your property is owned or securitized by Fannie Mae or Freddie Mac (Don't know? See below),
• At the time you apply, you are current on your mortgage payments (current means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months or, if you have had the loan for less than 12 months, you have never missed a payment),
• You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house,
• You have income sufficient to support the new mortgage payments, and
• The refinance improves the long term affordability or stability of your loan.

3. How do I know if the refinance will improve the long term affordability or stability of my loan?

Your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, refinancing may not be right for
you. Also consider that refinancing from an adjustable rate to a fixed rate loan or eliminating higher risk loan terms such as interest only payments or balloon payments may also provide long term stability.

4. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

You should call your mortgage lender or servicer (the organization to whom you make your monthly mortgage payments) and ask about the program.
Both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available. Borrowers will provide or enter information to determine if either agency owns or securitized the loan. This information is not a guarantee of eligibility for the refinance program, as other qualifying criteria must also be met.
• For Fannie Mae, o 1-800-7FANNIE (8am to 8pm EST).o www.fanniemae.com/loanlookup
• Freddie Mac o 1-800-FREDDIE (8am to 8pm EST) o www.freddiemac.com/mymortgage

5. I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify. The current value of your property will be determined after you apply to refinance.

6. I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

7. Will refinancing lower my payments?

The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.

Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and payment. These borrowers, however, could save a great deal over the life of the loan by avoiding future mortgage payment increases. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
8. What are the interest rate and other terms of this refinance offer?

The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon payments.

9. Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Home Affordable Refinance is to help borrowers get into more affordable loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you pay over the life of the loan.

10. Can I get cash out to pay other debts?

No. However, borrowers whose loans are owned or securitized by Fannie Mae may be eligible to finance all closing costs and obtain a small amount of cash (2% of the mortgage amount not to exceed $2,000) through the refinance if there is sufficient equity. For borrowers whose loans are owned or securitized by Freddie Mac, transaction costs (not to exceed $2,500) such as the cost of an appraisal or title report, may be included in the refinanced amount.

11. How do I apply for a Home Affordable Refinance?

You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process. The number is on your monthly mortgage bill or coupon book. Please be patient. Lenders and servicers are implementing the program now and it may take time before they are ready to process all applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.
Additionally, beginning April 4, 2009, borrowers whose loans are owned or securitized by Fannie Mae may also apply through any Fannie Mae approved lender.
Nearly all major banks and mortgage brokers are approved to work with Fannie Me. Ask the lender you choose if it is authorized to provide a Home Affordable Refinance.

12. What documentation will I need?

It will help your lender if you gather some information and documents before you call. You will need:
• Information about the monthly gross (before tax) income of all the borrowers on your loan, including recent pay stubs if you receive them or documentation of income you receive from other sources.
• Your most recent income tax return.
• Information about any second mortgage on the house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all your other debts such as student loans and car loans.

13. I am delinquent on my mortgage. Will I qualify for a Home Affordable Refinance?

No. Borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option for you.

14. Will I need mortgage insurance?

If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for the refinanced loan. If your existing loan does not have private mortgage insurance it will not be required as part of the Home Affordable Refinance.

15. How long will the Home Affordable Refinance be available?

The program expires on June 10, 2010. Your refinance transaction must be closed and funded on or before that date.

HOME AFFORDABLE MODIFICATIONS

1. Can Making Home Affordable help me if my loan is not owned or securitized by Fannie Mae or Freddie Mac?

Yes. Making Home Affordable offers help to borrowers who are struggling to keep their loans current or who are already behind on their mortgage payments. By providing mortgage servicers with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

2. How do I know if I qualify for a Home Affordable Modification?

To apply for a Home Affordable Modification, you must:
• Be an owner-occupant in a one to four unit property,
• Have an unpaid principal balance that is equal to or less than $729,750 for one unit properties (there is a higher limit for two to four unit properties - consult your servicer),
• Have a loan that was originated on or before January 1, 2009,
• Have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income, and
• Have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.
If you answered YES to all of these questions, you may be eligible to apply for a Home Affordable Modification. Only your servicer will be able to tell you if you qualify.

3. Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?

No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default, for example, because their mortgage payment has recently increased to a level that is not affordable. If you have had or anticipate a significant increase in your mortgage payment or you have had a significant reduction in income or have experienced some other hardship that makes you unable to pay your mortgage, contact your servicer. You will be required to document your income and expenses and provide evidence of the hardship or change in your circumstances.

4. I have a second mortgage. Am I still eligible?

Yes, but only the first mortgage is eligible for a modification.

5. How do I know if my servicer is participating? Are all servicers required to participate?

Servicer participation in the program is voluntary. However, the government is offering substantial incentives to servicers and investors, and it is expected that most major servicers will participate. Participating servicers will sign a contract with Treasury’s financial agent, through which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.
As contracts are signed, a list of participating servicers will be available on the Internet at www.makinghomeaffordable.gov.

6. What will my servicer do to determine if I qualify?

If you report a hardship, your servicer will:
• Determine whether your loan meets the minimum eligibility criteria (owner occupied, originated on or before January 1, 2009, unpaid principal balance equal to or less than $729,750). If yes
• Ask about current income, assets and expenses as well as the specific circumstances relating to the hardship to determine if you will be unable to make your mortgage payment. (Your servicer may initially accept verbal information about your income and expenses, but eventually you will need to provide proof in the form of tax returns, pay stubs and other evidence).
• Determine if your monthly first lien mortgage payment is more than 31% (approximately 1/3) of your gross or pre-tax monthly income. If yes:
• Add past due charges (interest, taxes, insurance and costs that your lender paid to other parties on your behalf – but not late fees, those must be waived) to the loan balance.
• Determine how much of an interest rate reduction will be required to get your first mortgage payment down to a point where it is no more than 31% of your gross monthly income.
• Apply a value test to determine if the cost of the modification (including the government’s incentive payments) is less costly for the investor than not modifying the loan (loans held by borrowers who have a lot of equity or whose incomes are very low in relation to the value of their homes probably will not pass this value test). If yes:
• Put you on a trial modification for three months at the new interest rate and payment level.
• If you successfully make the payments and are current at the end of the trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years, and then capped at a low rate for the remaining life of the loan.
NOTE: You will be required to sign the modification agreement and other document and attest that all of the information you provided to your servicer was true and accurate. Misrepresenting any information required for the Home Affordable Modification is a violation of Federal Law and has serious consequences.

7. What happens after five years?
If the modified interest rate is below the market rate, the modified rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. The cap is equal to the prevailing market interest rate on the date the modification is finalized as published by Freddie Mac based on a survey of its customers. This cap means that your rate can never be higher than the market rate on the day your loan was modified. If the modified rate is at or above the prevailing market rate, as defined above, the modified rate will be fixed for the life of the loan.

8. Will the modified loan include property taxes and homeowners insurance?

Yes. The modification payment will include a monthly amount to be set aside (escrowed) to pay taxes and insurance when they become due. This escrow is required even if your prior loan did not include an escrow.

9. How low can my interest rate go?

Treasury is providing incentives to your investor to write the interest down to as low as 2%, if necessary to get to a payment that you can afford based on your income.

10. What happens if that is not enough to get to an affordable payment?

If a 2% interest rate does not result in a payment that is affordable (no more than 31% of your gross monthly income), your servicer will:
• First try to extend your payment term. At the servicer’s option your payments could be extended out to 40 years.
• If that is still not sufficient your servicer may defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance.
• A portion of the debt could be also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.

11. Could I end up with a balloon payment?

Yes. If your servicer determines that a principal forbearance is required to get your monthly payment to an affordable level, the amount of the forbearance, say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that had no interest and was not due until you paid off your loan, refinanced or sold your house.

12. What happens if I am unable to make payments during the trial period?

Borrowers who are unable to make three payments by the end of the trial period are not eligible for a Home Affordable Modification. However, you may be eligible for other foreclosure prevention options offered by your servicer.

13. How much will a modification cost me?

Borrowers who are behind on payments or at risk of imminent default often do not have cash to pay for the expenses of a loan modification. Borrowers who qualify for a Home Affordable Modification will never be required to pay a modification fee or pay past due late fees. If there are costs associated with the modification, such as payment of back taxes, your servicer will give you the option of adding them to the amount you owe on your mortgage or paying some or all of the expenses in advance. Paying these expenses in advance will reduce your new monthly payment and save interest costs over the life of your loan.
If you would like assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a counseling fee. Borrowers should beware of any organization that attempts to charge an upfront fee for housing counseling or modification of a delinquent loan, or any organization that claims to guarantee success.

14. Is housing counseling required under this program?

Borrowers, especially delinquent borrowers, are strongly encouraged to contact a HUD-approved housing counselor to help them understand all of their financial options and to create a workable budget plan. These services are free. However, housing counseling is only required for borrowers whose total monthly debts are very high in relation their incomes. It is voluntary for other applicants.
When you apply for a Home Affordable Modification, your servicer will analyze your monthly debts, including the amount you will owe on the new mortgage payment after it is modified, as well as payments on a second mortgage, car loans, credit cards or child support. If the sum of all of these recurring monthly expenses is equal to or more than 55% of your gross monthly income, you must agree to participate in housing counseling provided by a HUD-approved housing counselor as a condition of getting the modification.

15. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. Borrowers who make timely payments on their modified loans will receive success incentives. For every month you make a payment on time, Treasury will pay an incentive

that reduces the principal balance on your loan. The incentive will be applied directly to your loan balance annually and over five years the total principal reduction could add up to $5,000. This contribution by the Treasury will help you build equity faster.

16. I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for a Home Affordable Modification?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage servicer will check to see if the dwelling is your primary residence. Misrepresenting your occupancy in order to qualify for this program is a violation of Federal law and may have serious consequences.

17. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on two, three and four unit properties are eligible as long as you live in one unit as your primary residence.

18. I owe more than my house is worth. Will a Home Affordable Modification reduce what I owe?

The primary objective of the Making Home Affordable Program is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Investors may, but are not required to, offer principal reductions. It is more likely that your servicer will use interest rate reductions in order to make your payment affordable.

19. I have an FHA loan. Can it be modified under the making Home Affordable Program? Are all loans eligible?

Most conventional loans including prime, subprime and adjustable loans, loans owned by Fannie Mae, Freddie Mac and private lenders and most loans in mortgage backed securities are eligible for a Home Affordable Modification. The Administration is working with the Congress to enact legislation that will allow FHA and VA to offer modifications consistent with Making Home Affordable in the near future. Currently loans insured or guaranteed by these agencies are being modified under other programs that also enable borrowers to retain homeownership.

20. How do I apply for a modification under the Making Home Affordable Plan?

If you meet the general eligibility criteria for the program, you should gather the financial documentation that your servicer will need to determine if you qualify. Once you have this information, you should call your mortgage servicer and ask to be considered for a Home Affordable Modification. The number is on your monthly mortgage bill or coupon book.
If your loan is current, please be patient as it may take some time before servicers are able to process all applications. However, servicers immediately can begin reviewing the eligibility of borrowers.
If you would like to speak to a housing counselor you can call 1-888-995-HOPE (4673). HUD-approved housing counselors can help you evaluate your income and expenses and understand your options. This counseling is FREE. If you have already missed one or more mortgage payments and have not yet spoken to your servicer call them immediately.

What information and documents will I need?

It will help your servicer and speed processing of your application if you gather some information and documents before you call. For all borrowers on your loan, you will need:
• Information about monthly gross income, including recent pay stubs if the borrowers are salaried and receive them and documentation of any income received from other sources.
• Most recent income tax return.
• Information about assets.
• Information about any second mortgage on the house.
• Account balances and minimum monthly payments due on all credit cards.
• Account balances and monthly payments on all other debts such as student loans and car loans.
• A letter describing why your mortgage is unaffordable (i.e. what caused your income(s) to be reduced or expenses to be increased).

How long will the Home Affordable Modification Program be available?

The program expires on December 31, 2012. Your trial modification must be in place by that date.

My loan is scheduled for foreclosure soon. What should I do?

Many servicers have made a commitment to postpone foreclosure sales on all mortgages that meet the minimum eligibility criteria for a Home Affordable Modification until those loans can be fully evaluated.
However, borrowers whose loans have been scheduled for foreclosure or any borrower that has missed one or more mortgage payments and has not yet spoken to their servicer should contact the servicer immediately. Borrowers may also contact a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).

WHAT ELSE DO I NEED TO KNOW?

1. Who is my “loan servicer? Is that the same as my lender or investor?

Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they own your loan, however, many loans are owned by groups of investors.
Traditionally, banks used money deposited in customers’ savings accounts to make loans. They held the loans, earning the interest as borrowers repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing borrowers repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money to lend.
Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers.
If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.

2. Why does my loan servicer have to ask the investor if they can do a loan modification?

If the organization that services your loan does not own it, your servicer may need to get permission from the owner or investor before they can change any of the terms of your loan. Generally, there is a contract between the servicer and the investor that states what kind of actions the servicer is allowed to take. Most of these contracts, called pooling and servicing agreements (PSAs), give the servicer a lot of leeway to make modification decisions, so long as the modification provides a better financial outcome for the investor than not modifying the loan.

3. What should I do if my servicer tells me that the investor is not participating in Making Home Affordable?

As contracts with servicers and investors are signed, the list of participants will be posted at http://www.makinghomeaffordable.gov/. Borrowers should check first to see if their servicer is listed. If so, you should call your servicer back and ask to speak to a supervisor or you may contact a HUD-approved housing counselor for assistance. If your servicer or investor is not participating in the program, you should ask your servicer or a housing counselor about other workout options that may be available.

BEWARE OF FORECLOSURE RESCUE SCAMS – HELP IS FREE!

• There should never be a fee for assistance with or information about the Making Home Affordable Program.
• Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling service or modification of a delinquent loan. Do not pay – walk away!
• Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
• Never make your mortgage payments to anyone other than your mortgage company without their approval.

HUD SECRETARY DONOVAN ANNOUNCES EXPANDED ELIGIBILITY FOR MAKING HOME AFFORDABLE REFINANCING

July 01, 2009

Announces eligibility for borrowers up to 125% underwater in Las Vegas with Senate Majority Leader Harry Reid and Congresswoman Dina Titus
WASHINGTON - U.S. Housing and Urban Development Secretary Shaun Donovan today announced an expansion of the Obama Administration's Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage. Under authorization provided by the Federal Housing Finance Agency, borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will now be allowed to refinance those loans according to the terms of the Home Affordable Refinance program established earlier this year.

Secretary Donovan made the announcement while touring a neighborhood in Las Vegas with Senate Majority Leader Harry Reid (D-NV) and Congresswoman Dina Titus. Las Vegas leads the nation in foreclosures and approximately 67 percent of the current mortgage holders have mortgages that are higher than the worth of their homes.

"I am here in Las Vegas because it is ground zero of the foreclosure crisis," Secretary Donovan said. "I am pleased to join Senator Reid and Congresswoman Titus to make this announcement today, which I believe will make a critical difference in our ability to help many more Americans, particularly those here in Nevada, to stay in their homes. The president's Making Home Affordable plan is already helping far more families than any previous foreclosure initiative and with today's announcement we will extend its reach still further."

"I am pleased Secretary Donovan accepted my invitation to come to Nevada and see firsthand the challenges homeowners here are facing," Senator Reid said. "His announcement that the loan-to-value requirement for the Administration's refinance program has been raised to 125 percent is good news for Nevadans fighting to stay in their homes. The neighborhood we visited today represents the hardships caused by the housing crisis and the hope that is being restored through the neighborhood stabilization program and the Home Affordable refinance program."

"I am pleased to welcome Secretary Donovan to Las Vegas and thank him for coming. This is an opportunity to show him firsthand the magnitude of the foreclosure crisis in Southern Nevada," Congresswoman Titus said. "His announcement that the Making Home Affordable program will be expanded to help those further underwater, something I have advocated for, is welcome news that will help thousands of Nevadans stay in their home. I will continue working with Senator Reid, Secretary Donovan, and the rest of the Administration to find more ways to help the hardest hit areas like Southern Nevada, as every new foreclosure prolongs the housing crisis and hampers our country's ability to move out of the current recession."

"This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market," said Treasury Secretary Tim Geithner. "By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery."

Currently, only those borrowers whose first mortgage does not exceed 105 percent of the current market value of the property are eligible for the Obama Administration's Home Affordable Refinance Program. For example if the property is worth $200,000, the borrower must owe $210,000 or less. Today's announcement will allow more homeowners to become eligible for the program, by increasing the eligibility to 125 percent.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. In just a few months, more than 200,000 borrowers have received offers for trial loan modifications, tens of thousands of refinances and trial modifications are under way, and informational mailings about the program have been sent to more than one million borrowers who may be eligible.

Donovan toured a neighborhood that has experienced several foreclosures in recent years, negatively impacting the property values of surrounding homes. The neighborhood has been targeted for Clark County's Neighborhood Stabilization Program, which will use funds to purchase and rehab foreclosed homes, provide downpayment and closing cost assistance to those purchasing foreclosed homes, and provide housing counseling to potential buyers.

Donovan also announced his plans to deploy HUD Foreclosure Rapid Response Teams to assess the areas hardest hit by foreclosure, starting in Las Vegas. The Las Vegas team will consist of two senior-level HUD Field staff with experience in Single Family Housing and in community outreach. Their task in the next two weeks will be to determine the needs in Nevada and in surrounding areas based on delinquency rate data at the zip code level, as well as listening sessions with local stakeholders such as housing counseling agencies, lenders, and members of the public. Based on the Foreclosure Rapid Response Team's assessment, HUD will commit two full-time employees to implement their recommendations. Additionally, HUD plans to deploy two Fair Housing equal opportunity specialists to the Las Vegas HUD office, which will provide the opportunity to conduct outreach and education locally, receive discrimination complaints and more readily conduct full investigations.

HUD receives about 100 complaints of housing discrimination every year from residents of Nevada, well over double what was received as recently as 2005. With a local presence, HUD's Fair Housing & Equal Opportunity office should make it easier for Nevada residents to obtain justice and relief, to educate housing consumers about predatory lending, and to conduct program compliance and monitoring in the over 3000 public housing units and over 8500 Section 8 vouchers.

Homeowner Affordability and Stability Plan
February 18, 2009

Executive Summary

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.

Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.

Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.

Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.
Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affordable

A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac

The Homeowner Affordability and Stability Plan is part of the President's broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:

1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices

· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:

o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today's low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.

2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.

No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.

Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.

Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:

A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower's monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.

"Pay for Success" Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive "pay for success" fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.

Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.

Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.

Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC's pioneering work. The Guidelines will be used for the Administration's new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans' Affairs and the Department of Agriculture.

Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities

Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance

Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options

Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds

Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers

3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:

Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.

Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.

Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.

Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs' retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.
Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.

Hope for Homeowners
December 2008 Report

Background

The HOPE for Homeowners Program (Program) was established by the Housing and Economic Recovery Act of 2008 (Act), and signed into law on July 30, 2008.1 Section 257(l) of the Act requires the Board of Directors of the Program (Board) to transmit to Congress on a monthly basis a report on the Program’s progress.

Under the Program, eligible homeowners may refinance their current mortgage loans into a new mortgage insured by the Federal Housing Administration (FHA). The Program is voluntary for all participating parties. In order to participate, borrowers and their current lenders must agree to the Program requirements. The Program requires existing lenders holding senior mortgage liens on the property to release their liens and accept as payment in full the proceeds of the new Program loan. Existing junior mortgage lien holders must also release their liens under the terms of the Program in return for a share of future appreciation of the subject property’s value or, as recently approved by the Board, for an upfront payment that is a percentage of the outstanding amount of the junior mortgage loan. The Program requires borrowers to share with HUD a portion of the equity created upon the issuance of the new FHA loan as well as a portion of any future appreciation on the subject property.
 

The Board is responsible for establishing standards and policies for the Program as contemplated by the Act. The Program went into operation on October 1, the first allowable date under the Act.

This report is based on Program information and Board efforts to implement the Program through mid-December. Similar to the previous monthly reports, no program data is available at this time. Therefore, this report provides information on outreach activities that have been conducted to date. In addition, this report describes the  programmatic changes approved by the Board on December 17, 2008, to increase the potential pool of qualified applicants and to promote lender participation. A new mortgagee letter detailing the Board-approved programmatic changes under the Emergency Economic Stabilization Act (EESA) will be issued shortly.

Outreach and Training

As reported last month, FHA is undertaking extensive outreach, education, and training in support of the Program. The primary national FHA training session for the month of December was held at the NeighborWorks Training Institute in Washington, DC, from December 8 through December 12. The session echoed the November national training in Atlanta. The lending industry and counselors continue to experience difficulty in offering or finding suitable borrowers for the Program. The central concerns are the cost of the Program to the borrower and lender, the legislative features that deviate from standard FHA products to make it more administratively complex, and the lack of a secondary market for these loans to date. The H4H Board is sensitive to these issues, and work is under way to address them to the extent possible under current law.

With regard to borrower outreach, FHA and our partner agencies are developing an integrated consumer advertising campaign across a variety of media including radio, print, and the Internet. We are engaging HUD’s target audiences through various online channels, while referring interested parties to the FHA.gov portal for detailed information. We have also leveraged HUD’s field network and industry partners to expand outreach. Two online training tools are being developed by the Federal Reserve Board to post on the FHA Web site. On December 5, FHA and NeighborWorks America developed an online training course about the Program for housing counselors; this course will be posted on the Web sites of both organizations.

Recognizing that timely outreach from the lender community to struggling consumers is critically important, a form has been added to the Program Web site for FHA-approved lenders to sign up for the HOPE for Homeowners Program. There are currently more than 200 brokers included on the list, which is available for consumers on FHA.gov. Unfortunately, very few sponsoring lenders, who would underwrite, close and fund H4H loans, have signed up for the program to date. The lending community needs time to understand the unique statutory requirements of the HOPE for Homeowners Program, to modify their protocols and practices, to train their staff, and to update their technology systems before they can responsibly offer it to consumers. Consumers are strongly encouraged to contact their servicing lender and any subordinate lien holders since their participation is vital for a refinance into a HOPE for Homeowners mortgage.

Board-Approved Changes

The new statutory authority provided by Emergency Economic Stabilization Act (EESA) offered the Board the means to make some immediate changes to the Program that should expand eligibility and encourage greater Program participation by lenders. At its most recent meeting on December 17, 2008, the Board approved the following changes to the Program:

 Two to Four-Unit Properties. The types of properties eligible for the Program have been expanded to include two to four-unit owner-occupied properties. That change should allow more borrowers to participate in the Program, especially in certain geographic areas like the Northeast, where two to four-unit properties are more common.

 Endorsement Timeframe. The timeframe for lenders to obtain endorsement for Program loans has been expanded so that it is consistent with other FHA programs. This change will make the endorsement process simpler for lenders. To ensure that lenders comply with the first payment default provision established in the law, the Board will continue to require the lender to include in the file evidence that the borrower has made the first payment within 120 days of loan closing.

 Equity Sharing. The equity sharing requirements of the Program have been modified to eliminate the potential for a borrower to be required to share any existing equity the borrower may already have in the home with HUD through the Program.

The changes, some of which were detailed in the November report, are being reviewed by the Office of Management and Budget.  Additionally, the Board of Governors of the Federal Reserve System (FRB) is developing legal guidance on the treatment of the statutory equity and appreciation sharing provisions of the Program under the Truth in Lending Act (TILA), the Home Owners Equity Protection Act (HOEPA), and other consumer laws administered by the FRB.

The FRB’s Division of Consumer and Community Affairs, which is responsible for issuing interpretive guidance under TILA and HOEPA, plans to issue interpretive guidance on these matters shortly. This guidance will be posted on the Program’s website.

Program Activities to Date

The total activity under the Program continues to be low. One loan has been closed, but had not yet finished the insurance endorsement process. As of mid-December, 300 case numbers have been assigned. The assignment of a case number indicates to FHA that the lender intends to qualify the borrower for a HOPE for Homeowners loan.

There are 67 lenders associated with these case numbers, with the majority of case numbers requested by a single lender. Most of the case numbers are for homeowners living in California, Florida, and Nevada.  These initial 300 case numbers provide a first opportunity to analyze the potential effects of the various qualification criteria for HOPE for Homeowners loans. Each of the 300 cases has been run through an automated fraud detection tool to ensure compliance with the various statutory provisions. FHA has made this tool available to lenders as a specialized fraud detection tool, which also identifies cases where owner-occupancy may be in question. Ninety have been flagged for possible non-compliance under one or more of the following statutory requirements: owner occupancy, ownership of no more than one residential property, and no fraud convictions over the previous 10 years. An additional 181 cases required a manual search for fraud conviction, as an automated search is unavailable in approximately 10 states due to privacy restrictions. Once the tool has been run and an issue is identified, the lender must resolve the issue before a HOPE for Homeowners loan can be insured. Only 10% of cases run required no follow up. Assuming the experience with these 300 loans is indicative of the broader population of HOPE for Homeowners borrowers, it could well take a lender and borrower longer to complete the HOPE for Homeowners loan transaction than it would for other FHA loan products.

The first HOPE for Homeowners loan was closed this week by Lend America on a property located in California. As California is one of the states where the public records on fraud convictions are not available, this case was flagged and a manual search is required. The loan cannot be insured until that search is complete.

While interest thus far has been lower than expected and some challenges remain, these preliminary figures are a positive sign that there is interest in the program. We continue to get reports that lenders are working to identify borrowers who may qualify for the Program. The Board anticipates that interest in the Program will grow as a result of enhancements to the Program made under EESA and described above.

The Obama-Biden Plan
Barack Obama and Joe Biden have a plan to revitalize the economy

Our country faces its most serious economic crisis since the great depression. Working families, who saw their incomes decline by $2,000 in the economic "expansion" from 2000 to 2007, now face even deeper income losses. Retirement savings accounts have lost $2 trillion. Markets have fallen 40% in less than a year. Millions of homeowners who played by the rules can't meet their mortgage payments and face foreclosure as the value of their homes have plummeted. With credit markets nearly frozen, businesses large and small cannot access the credit they need to meet payroll and create jobs.

Barack Obama and Joe Biden have a plan to revitalize the economy.

1. Immediate Action to Create Good Jobs in America
2. Immediate Relief for Struggling Families
3. Direct, Immediate Assistance for Homeowners, Not a Bailout for Irresponsible Mortgage Lenders
4. A Rapid, Aggressive Response to Our Financial Crisis, Using All the Tools We Have

[...]

3. DIRECT, IMMEDIATE ASSISTANCE FOR HOMEOWNERS, NOT A BAILOUT FOR IRRESPONSIBLE MORTGAGE LENDERS

Over the past two years, Americans have lost 20 percent of the value of their homes. In some parts of the country home values have fallen by twice that amount. In combination with a rapidly deteriorating economy, that means more and more families are having a hard time meeting their monthly mortgage payments. At the same time, many states are considering property tax hikes that will burden homeowners still further.

And millions of families who have seen the value of their homes fall below the cost of their mortgages need assistance in restructuring their mortgages to stay in their homes.

Barack Obama and Joe Biden's plan provides direct relief to help America's homeowners pay their mortgages, stay in their homes, and avoid painful tax increases while protecting taxpayers and not rewarding the bad behavior and bad actors who got us into this mess:

* Instruct the Secretaries of the Treasury and Housing and Urban Development (HUD) to use their existing authority to more aggressively modify the terms of mortgages: Barack Obama was an early champion of the HOPE for Homeowners Act that passed over the summer. In addition, Obama insisted that the financial rescue plan Congress recently passed include authority for the Secretary to work with servicers to modify the terms of mortgages for homeowners who played by the rules. Obama and Biden believe that both of these plans should be implemented aggressively and comprehensively. In addition, Obama and Biden are calling on Treasury and HUD to develop a plan to work with state housing agencies to coordinate broad mortgage restructurings. The Dodd-Frank legislation gives states broader authority to help struggling homeowners, and coordination is essential to ensure that state and national efforts are working in concert to help as many homeowners as possible at the minimum cost to taxpayers.

* Reform the bankruptcy code to assist homeowners and remove legal impediments to encouraging broader mortgage restructuring: Obama and Biden are also calling for legislation to close the loophole in our bankruptcy code that allows bankruptcy judges to modify the terms of mortgages on investment properties and vacation homes but not on primary residences. He also believes we should clarify the legal liability of mortgage servicers so that servicers who work with struggling homeowners to modify their mortgages will receive legal protections. And we should remove any tax- or legal-related impediments to encouraging shared-equity mortgages within the HOPE for Homeownership process.

* Enact a 90-day foreclosure moratorium for homeowners who are acting in good faith: Financial institutions that participate in the financial rescue plan should be required to adhere to a homeowner's code of conduct, including a 90-day foreclosure moratorium for any homeowners living in their homes who are making good faith efforts to pay their mortgages. This will help create stability until the more far-reaching solutions are implemented and give both sides a chance to work out an agreement.

* Provide $25 Billion in state fiscal relief to help avoid painful property tax increases: Budget crunches across the nation are putting our local governments in the untenable position of having to choose between raising property taxes and cutting vital services. Obama has proposed $25 billion in state fiscal relief that, coupled with the new emergency facility to address the state credit crunch, will help states and localities continue to provide essential services like health care, police, fire and education without raising taxes or fees.

* Create a universal mortgage tax credit for homeowners: Barack Obama believes we should immediately enact a 10 percent refundable tax credit on the mortgage interest paid by hardworking American families who do not itemize their taxes. This credit will help offset the cost of mortgage payments for at least 10 million middle-class homeowners.

January 9, 2009

STATEMENT OF JAMES A. HEIST ASSISTANT INSPECTOR GENERAL FOR AUDIT DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
BEFORE THE COMMITTEE ON FINANCIAL SERVICES UNITED STATES HOUSE OF REPRESENTATIVES

Chairman Frank, Ranking Member Bachus, and members of the Committee, thank you for inviting me to testify today. I very much appreciate the opportunity to testify on behalf of the Inspector General on the important issue of FHA oversight of loan originators.

Background

The U.S. Department of Housing and Urban Development (HUD) Inspector General is one of the original 12 Inspectors General authorized under the Inspector General Act of 1978. The OIG strives to make a difference in HUD’s performance and accountability. The OIG is committed to its statutory mission of detecting and preventing fraud, waste, and abuse and promoting the effectiveness and efficiency of government operations. While organizationally located within the Department, the OIG operates independently with separate budget authority. This independence allows for clear and objective reporting to the Secretary and to the Congress.
The Department’s primary challenge is to find ways to improve housing and to expand opportunities for families seeking to improve their quality of life. HUD does this through a variety of housing and community development programs aimed at helping Americans nationwide obtain affordable housing. These programs, which include Federal Housing Administration (FHA) mortgage insurance for Single-Family and Multifamily properties are funded through a $30+ billion annual budget and, in the case of FHA, through mortgage insurance premiums.
The Committee asked that we provide an overview of recent changes to the FHA program, an assessment of FHA requirements and needs, identify any issues of importance, and detail any ongoing or planned OIG work in the area. We have recently stated in correspondence to the Congress that, through the multitude of our work in auditing and investigating many facets of the FHA programs over the course of many years, we have had, and continue to have, concerns regarding FHA’s systems and infrastructure to adequately perform its current requirements and services. This was expressed by the OIG to the FHA through audits and reports regarding a spectrum of areas prior to the current influx of loans coming into the program and prior to the consideration of the numerous proposals that expanded its reach. We continue to remain keenly interested in FHA’s ability and capacity to oversee the newly generated business.

The Landscape

The past year and a half have certainly produced a lot of changes and initiatives. In response to increasing delinquencies and foreclosures brought about by the collapsing subprime mortgage market, in September 2007, HUD acted administratively to provide mortgage assistance through the FHA Secure program to refinance existing subprime mortgages. The program was expanded in May 2008 to provide lenders the added flexibility to refinance and insure more mortgages, including those for borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lenders. The FHA recently issued a formal letter terminating the program stating that “maintaining the program past the original termination date would have a negative financial impact on the MMI Fund.”

The Housing and Economic Recovery Act passed last summer, created a new Hope for Homeowners program to enable FHA to refinance the mortgages of at-risk borrowers. While activity to date has been limited, the FHA was authorized to guarantee $300 billion in new loans to help prevent an estimated 400,000 homeowners from foreclosure. It also authorized changes to the FHA’s Home Equity Conversion Mortgage (reverse) program that will enable more seniors to tap into their home’s equity.

As we turn to today’s environment, the volume of Single-Family FHA-insured loans has enlarged in Fiscal Year 2008 by tripling from $59 billion in Fiscal Year 2007 to over $180 billion in Fiscal Year 2008. The latest figures from Single-Family market comparisons from October 2008, show that FHA’s total endorsements have increased from 21% of the market the year before to 76% of the market which includes both home sales and refinances. FHA’s home sales’ market share has increased from 6.4% to 23%. Many potential homeowner loans may not have come to the agency yet as some of the new initiatives are still taking hold and the industry is flushing out its options and possibly posturing for more favorable terms. FHA may not be able to handle its expanded workload or new programs that require the agency to take on riskier loans then it historically has had in its portfolio.

FHA Resources

It is our understanding from the Department that funding for 22 staff positions and approximately $20 million for system improvements have been made available for the Hope for Homeowners program. They further tell us that they have limited resources for other newly-instituted modernization initiatives and that while they did receive a modest amount to be used for the administration (by the Office of Community Planning and Development) of the Neighborhood Stabilization Program, that funding must also be used for other disaster assistance needs. As you are aware, the Department as a whole has had significant new responsibilities over the last seven years in rebuilding communities devastated by disasters (i.e., lower Manhattan post-September 11th; the Gulf Coast region after hurricanes Katrina, Rita and Wilma; the Galveston area after recent hurricanes; California fires; and Midwest flooding) that have added approximately $30 billion in new program funds that require quick distribution and important oversight.

FHA tells us that they are reprogramming other funds to try to address modernization requirements. Yet, it remains very tight particularly as it relates to oversight. For example, the mortgage licensing provisions contained in the new legislation set minimum standards for nationwide licensing and a registration system for mortgage broker and loan officers. We have
recently been told that there is one FHA person in the RESPA (Real Estate Settlements Procedure Act) unit who is assigned to work with the States in complying with this new regulatory requirement.

We continue to believe there is a critical need for more resources for FHA: 1) to enhance its IT systems; 2) to increase its personnel in a way to deal with an escalation in processing requirements; 3) to increase its training of personnel to maintain a workforce with the necessary skills to deal with the responsibility of this new portfolio; 4) to oversee the numerous contractors it maintains; and 5) to increase its oversight in all critical front end issues including such important areas as the appraisal and underwriting processes.
While not the focus of this hearing, we are also concerned that increases in demand to the FHA program are having collateral implications for the integrity of the Government National Mortgage Association (Ginnie Mae) mortgage-backed securities program including the potential for increases in fraud in that program. HUD too needs to consider the downstream risks to investors and financial institutions of Ginnie Mae’s eventual securitization of a large proportion of the Hope for Homeowners and Home Equity Conversion Mortgage (HECM) Single-Family loans. Like FHA, Ginnie Mae has seen an augmentation in its market share (it had a 39% market share for the month of October 2008 surpassing both Fannie Mae and Freddie Mac and increased $150 billion in outstanding mortgage-backed securities and commitments during a one year period from FY 2007 to FY 2008) and it too has stretched and limited resources to adequately address this increase.

Despite all these enumerated issues, we are gratified that a new penalty provision was inserted into the Housing and Economic Recovery Act. When we corresponded during consideration of that legislation, we stated our belief that a new penalty enunciated specifically for the FHA program would be beneficial from an oversight and enforcement perspective. We assisted in its development and were very pleased that it was included in the final passage. The statute now creates a penalty for committing fraud against FHA programs, similar to the predicates established in the Financial Institutions Reform, Recovery and Enforcement Act legislation, and will be a useful tool for prosecutors and the law enforcement community to employ in order to address those who would seek to harm the program.

OIG Observations

The results of the latest actuarial study show that HUD has sustained significant losses in its Single-Family program making a once fairly robust program’s reserves smaller. The study shows that FHA’s fund to cover losses on the mortgages it insures are contracting. As of September 30, the fund’s economic value was an estimated $12.9 billion, an almost 40 percent drop from over $21 billion a year ago. The current $12.9 billion economic value represents 3 percent of the mortgages insured by the FHA. Although above the 2 percent ratio required by law, it is well below the 6.4 percent ratio from the same time last year. Moreover, these latest projections used macroeconomic forecast data as of June 2008 and are profoundly sensitive to the accuracy of those forecasts. If more pessimistic assumptions are factored in, the ratio could dip below 2 percent in succeeding years requiring an increase in premiums or Congressional appropriation intervention to make up the shortfall. Since its inception in 1934, FHA has been self-sustaining and it has paid premiums to the fund, which has covered its fluctuating defaults and foreclosures.

The largest problem facing FHA, and the lenders it works with, is the fallout from decreasing home values. About 6.5 percent of FHA loans are currently in default. This reinforces the importance for FHA approved lenders to maintain solid underwriting standards and quality control processes in order to withstand severe adverse economic conditions. Another extensive problem confronting FHA has been its inability to upgrade and replace legacy (developed in the 1970s and 1980s) application systems that had been previously scheduled to be integrated. The FHA systems environment remains at risk and must evolve to keep up with its new demands. Add to that an escalation in the properties owned and managed by FHA and the overall picture becomes more complicated.

Continuing OIG Audit and Inspection Concerns

We continue to focus our audit and inspection resources on the Single-Family program and point out where weaknesses or deficiencies need to be addressed. Among many different areas that we have reviewed, we have found that FHA needs to improve its internal control structure by formalizing risk assessments of its programs and its administrative functions and by conducting ongoing management control reviews. It also needs to establish a comprehensive strategy regarding its risk-based monitoring of program activities and participants and identify corrective actions required to improve its management controls in a timely manner. In another area, our audit of the FHA appraiser roster identified weaknesses in the quality control review and monitoring of the roster. The roster contained unreliable data including the listing of 3,480 appraisers with expired licenses and 199 appraisers that had been state sanctioned. In a further review, we found that HUD’s appraiser review process was not adequate to reliably and consistently identify and remedy deficiencies associated with appraisers. Moreover, results from a number of other key audits have noted significant lender underwriting deficiencies, inadequate quality controls, and other operational irregularities.
Additionally, we note that FHA’s lender approval process is largely manual. FHA will be challenged within current resource constraints to keep up with the increasing volume of entities doing business. FHA controls currently rely upon random, and again, manual processes by contractors to select for review about one in every 20 loans or approximately 5 percent. FHA then relies upon post-endorsement automated lender or service performance information, such as high delinquency or early default rates, to target these entities for examining a limited number of loans for quality assurance reviews. We believe FHA needs the resources to take advantage of commercial off-the-shelf pre-screening loan software or to require at least the larger lenders use such tools as part of their underwriting process.

Further, we have recently initiated an inspection of the Mortgagee Review Board (MRB) enforcement actions and its efficiency, effectiveness and impact in resolving cases of serious non-compliance with FHA regulations particularly during this period of significant changes in the housing market. The MRB is a statutorily created board within the Department that has responsibility to sanction FHA-approved lending institutions that violate applicable housing laws and HUD regulations and policies. The Departmental Enforcement Center is responsible for case preparation and referral to the MRB for final decision on sanctions.

Specifically, our review will determine the timeliness of decisions; evaluate controls over the mortgagee referral and enforcement processes; summarize data gathered on settlement agreements and collections; and provide an objective basis to comment on the effectiveness of the MRB as a regulatory body. We are looking into issues such as the types of penalties assessed; whether the penalties were mitigated to administrative payments; the sizes of the mortgagees brought before the board; the elapsed time from referral to board action; whether indemnification was required; and whether the mortgagees were repeat offenders or their principals were under limited denial of participations or debarred. We anticipate completion of this review in a few months.

Our audit work also highlights how problem lenders may regain admission into the FHA program even when previous transgressions were apparent. For example, we looked at an Arizona corporation that was approved as an FHA mortgage lender by HUD in 1996. This particular lender had 13 active branch offices and sponsored close to 2,000 FHA-approved loan correspondents nationwide. As highlighted in our audit, this lender had a number of serious issues related to RESPA violations such as paying marketing fees, non-competition fees and quality incentives to real estate companies in exchange for more than $57 million in FHA mortgage business. The corporation’s license was suspended by the State and it filed for bankruptcy. One of the principal owners and principal managers reconstituted under a different name but operates from the same location. In 2008, HUD approved the new entity to originate and process FHA loans despite its principals’ prior citations for RESPA violations.

Continuing OIG Investigative Concerns

Until recently, FHA’s market share remained quite low as conventional subprime loans were heavily marketed by lenders. The tightening credit market has increased FHA’s position as a loan insurer and, with that, is coming an increase in lender/brokers seeking to do business with the federal program and an overall concern regarding some of these loan originators. For example, we currently have under investigation for alleged inappropriate activities several FHA lenders who were also lenders in the subprime market. The movement towards HUD is already underway as reflected in recent statistics. FHA lender approvals increased 525% in a two year period. For example, as of the end of Fiscal Year 2008, FHA had over 3300 approved lenders as compared to 997 at the end of Fiscal Year 2007 for an increase of 330%. If you compare the FY 2008 totals (over 3300) to the FY 2006 totals (692) it is a 525% increase. Open applications received so far for FY 2009 total 1007 of which 827 have already been approved. The integrity and reliability of this crop of program loan originators, in our view, is unproven and, in light of the aggressive recent history of this industry, may pose a risk to the program.

In addition, FHA is now, due to loan limit increases, serving new metropolitan areas with which it previously has had little interaction. With such entry, come new players and unknown hazards. Simultaneous to this confluence of events, is an increase in the reported incidents of mortgage fraud. Mortgage fraud incidents reports, as compiled by the Mortgage Asset Research Institute, have increased by 45 percent in the second quarter compared to a year-ago period.

Like the Arizona example cited above in our audit concerns, we also have seen on the investigative side lenders reacquiring FHA approval despite past abuses. A previous investigation on an FHA lender in New York led to the debarment of its owner for a period of five years from originating FHA insured loans. After the debarment was served, the lender, under the same owner, resumed operations using the same fraudulent practices. We again reviewed some of the loans and determined that the originations were fraudulent similar to the loans investigated in the first case. The OIG, in conjunction with the U.S. Attorney’s Office, sought and received an injunction against them in order to stop the business from operating.

Following the injunction, FHA withdrew their lender approval.

In the area of foreclosure recovery, recent trends show that certain individuals in the industry are preying on desperate and vulnerable homeowners who are facing foreclosure. Some improper activities include equity skimming [whereby the homeowner is approached and offered an opportunity to get out of financial trouble by the promise to pay off the mortgage or to receive a sum of money when the property is sold -- the property is then deeded to the unscrupulous individual who may charge the homeowner rent and then fails to make the mortgage payment thereby causing the property to go into foreclosure] and lease/buy-back plans [wherein the homeowner is deceived into signing over title with the belief that they can remain in the house as a renter and eventually buy back -- the terms are so unrealistic that buy-back is impossible and the homeowner loses possession with the new title holder walking away with most or all of the equity].

Another area of concern is the growing Home Equity Conversion Mortgage program. As an internal matter, in 2007, FHA’s independent auditors identified a significant deficiency in the financial statement audit that showed the program being supported by a combination of servicer-provided applications, vendor databases, modification of existing FHA legacy systems and manually performed input to the FHA’s general ledger. From an external standpoint, we are aware that the larger loan limits can be attractive to exploiters of the elderly, whether it is by third parties or by even family members, who seek to strip equity from senior homeowners. Due to the vulnerability of the population this program serves, we are also concerned about evasions of statutory counseling requirements or even fraud by counseling entities. We are working with the Chairman and members of the Senate Committee on Aging to address some of their concerns regarding these issues.

Some HECM-related fraud activities involve flipping where an investor sells the property to an elderly straw buyer and enters into a quit claim deed with the straw buyer. The buyer applies for the HECM loan within a short time frame and the appraisal used to originate the HECM loan is then fraudulently inflated. This allows the investor to illegally divert the proceeds of the loan. Straw buyers are “recruited” in residential areas with a high rate of renters. The buyers are often unaware that they must pay property taxes and some are unaware that the cash due to them at closing has been diverted. A current investigation involves recruiting elderly homeless to live in properties victimizing these seniors who often have desperate needs. Another activity that we currently have under investigation involves financial professionals convincing HECM borrowers to invest HECM proceeds in a financial product such as an annuity. The financial professionals receive increased fees and, in the case of annuities, the victims are unable to get access to their savings for many years or even past their projected life expectancy. We have been partnering with the AARP and other groups to foster consumer protection education awareness. We are also a key participant in the mortgage fraud task forces nationwide coordinated by the Department of Justice.

The Office of the Inspector General stands ready to assist in whatever way is deemed necessary and will be vigilant in its efforts to protect the funds of the American taxpayer. We thank you for the opportunity to relay our impressions based on the body of our work and greatly appreciate the activities of the Congress to protect FHA’s funds from predatory and improper practices and to ensure an effective response on oversight of the lender community at this critical time.

December 22, 2008

HOPE NOW Projects Big Increases In Foreclosure Prevention Successes In 2009
November data confirms almost 1 million mortgage modifications

Washington, D.C. (December 22, 2008) – HOPE NOW, the private sector alliance of mortgage servicers, counselors, and investors that has been working aggressively to prevent foreclosures and keep homeowners in their homes, today announced that it expects to double the number of foreclosures prevented in 2009 by enhancing and expanding its very successful 2008 efforts.
HOPE NOW’s success is evident from the total 2008 results it can now project based on the actual 11-month data it is reporting today:

* A projected total of approximately 2.2 million foreclosure preventions

* Almost 950,000 mortgage modifications

* More than 20,000 homeowners helped at 29 workshops held across the United States

* More than 1 million total calls from homeowners to the Hope Hotline.

* An average of more than 7,000 calls per day to the Hope Hotline that was available 24 hours a day, 7 days a week, and 365 days a year.

* 2.9 million letters sent to at-risk homeowners

* An 18% response rate to the letters sent by HOPE NOW to at-risk homeowners, 6 times more than the typical response rate servicers receive when they send their own mailings.
In addition to these numerical achievements, in 2008 HOPE NOW also accomplished two important procedural milestones that have greatly expedited the foreclosure prevention process:

In June, HOPE NOW members agreed to a set of guidelines that, among other things, committed servicers to a much faster and simplified foreclosure prevention process. The guidelines also established the first-ever agreement for dealing with second liens,
which until then had been a major sticking point in the foreclosure prevention process.

* In November, HOPE NOW worked with Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency to create the Streamlined Modification Program (SMP), a much faster modification approval process for the most at-risk homeowners that went into effect December 15.

“No one did more to prevent foreclosures in 2008 than HOPE NOW,” said Faith Schwartz, HOPE NOW’s executive director. “But, because there’s more to do, in 2009 HOPE NOW is going to substantially expand its already successful efforts to make it even easier for at-risk homeowners to avoid foreclosure.”

HOPE NOW’s 2009 plans include:

An expected doubling of the number of modifications from the already high 2008 level. This will result an increased capacity of servicers to handle modification requests, the streamlined modification program, and the commitment by major institutions to modify loans on purchased portfolios. Depending on unemployment and other economic conditions, this could increase the number of modifications to 2 million or more next year.

* At least 30 additional homeowner workshops

* At least a 50% increase in the number of homeowners who attend workshops

* Additional innovative ways to provide counseling and other assistance to homeowners such as phone-a-thons

* A major web-based initiative that will supplement the existing ability of homeowners to begin the foreclosure prevention process through the Hope Hotline

* A very important and extremely visible enhancement to HOPE NOW’s existing efforts to reach at-risk homeowners that by itself could double or triple the number of homeowners helped by HOPE NOW

* Significantly enhanced loan-level data that will help the industry further analyze trends and make necessary adjustments to help prevent foreclosures and provide policymakers with important additional information.

“HOPE NOW deserves a great deal of credit for the nearly 3 million foreclosures it will have prevented by the end of 2008,” said Steve Bartlett, president and CEO of the Financial Services Roundtable. “The weak U.S. economy will present additional problems in 2009 and HOPE NOW’s success this year will be the solid foundation needed to meet those challenges,” he said.”

“The mortgage lending industry has shown enormous flexibility and commitment in the face of this past year’s constantly changing economic outlook” said John Courson, chief operating officer of the Mortgage Bankers Association. “The plans HOPE NOW has for 2009 demonstrate clearly that the whole mortgage lending industry will continue to serve the needs of homeowners no matter what the situation,” he added.

Colleen Hernandez, president and executive director of the Homeownership Preservation Foundation, which owns and operates the Hope Hotline, said that the 2008 results prove that phone counseling of homeowners is extremely effective. “The Hope Hotline was the only mortgage counseling service that was available to homeowners this year whenever they wanted or needed to call,” she said. “That level and quality of service will be needed even more in 2009.”

November Foreclosure Prevention Results

HOPE NOW also announced today that the mortgage industry prevented 208,000 foreclosures in November 2008 and a total of 651,000 in September, October, and November. This is the highest three-month total since HOPE NOW began to compile data in July 2007.

The November results, which are a slight change from the 225,000 foreclosure preventions completed in October, is the result of the five fewer working days in that month. The number of foreclosure preventions per day was greater in November than it was in October.

Approximately 2 million foreclosures have been prevented by the mortgage lending industry in the first 11 months of 2008, 25% more than the approximately 1.5 million prevented in all of 2007. If the current trend continues, in 2008 the mortgage lending industry will prevent approximately 2.2 million foreclosures, 45% more than in 2007.

November was the third consecutive month that total modifications exceeded 100,000. Since HOPE NOW began to compile data, over 1 million modifications have been completed, including a projected 950,000 in 2008.

Over the past three months, the number of modifications has increased by almost 29%, while the number of payment plans has increased by almost 6%. This increasing reliance on modifications rather than payment plans is expected to continue as economic conditions warrant.

The HOPE NOW November data also shows:

* For the first time, HOPE NOW members and the broader mortgage lending industry prevented more than 200,000 foreclosures in three consecutive months.

* Almost 30% of the homeowners with prime loans who received workouts in November received modifications.

* Nearly 62% of the homeowners with subprime loans who received workouts in November received modifications.

* The number of foreclosures started in November was 16,000 less than the number started in October.

* For the sixth month in a row, the number of foreclosure starts for prime loans exceeded those for subprime.

ABOUT HOPE NOW

HOPE NOW is the alliance of mortgage market participants, mortgage servicers, and counselors that is working to help as many homeowners as possible avoid foreclosure and stay in their homes. HOPE NOW coordinates a nationwide campaign to reach homeowners who may be at risk of losing their homes. HOPE NOW members have agreed to make substantial additional efforts to contact homeowners whose mortgages will reset in the coming months and to further expedite the process used to determine how best to keep them in their homes.
The Homeownership Preservation Foundation, a HOPE NOW member, operates the Homeowner’s HOPE™ Hotline, which is available 24 hours a day, 7 days a week, and 365 days a year. The Homeowner’s HOPE™ Hotline receives an average of more than 7,000 calls a day. There is no cost to homeowners for contacting a nonprofit counselor by calling 1-888-995-HOPE.

December 22, 2008

FACT SHEET
2008 HOPE NOW FORECLOSURE PREVENTION EFFORTS

According to the industry data, more than one million modifications have been made that have prevented foreclosures thus far as a result of HOPE NOW’s nationwide efforts.
In 2008, the HOPE NOW Alliance made great strides in its efforts to keep as many homeowners in their homes as possible. Through a new set of servicer guidelines, a series of concerted outreach efforts and the implementation of a unified data reporting system, HOPE NOW has been able to keep millions of homeowners out of foreclosure and provide valuable data on the market and industry

HOPE NOW servicers mailed 2.9 million letters to at-risk homeowners achieving an 18% response rate. The HOPE NOW response rate is approximately 6 times higher than servicer-to-borrower mailings.

HOPE NOW established and executed 29 outreach events between March and December of 2008. Servicers, city and Federal Government officials, regulators and housing counselors came together at various locations across the country to serve over 20,000 borrowers.

Established Loan Servicing Guidelines which were created and adopted by HOPE NOW servicers. A key commitment in the guidelines was the adoption of uniform outreach efforts, standards and timelines designed to streamline the process and make it more transparent for borrowers while loans are being “worked out.”

Working with the U.S. Treasury, the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, and mortgage loan servicers, HOPE NOW helped develop a new program, the “Streamlined Modification Plan” that will make it easier and faster to modify loans of at-risk homeowners.

HOPE NOW established a uniform monthly data reporting system. Since July 2007, HOPE NOW servicers have publically reported the aggregated monthly number of homeowners that have been helped either through modifications or repayment plans.

Created on-going forums for HUD housing counselors and servicers to discuss the challenges they face.

2009 HOPE NOW FORECLOSURE PREVENTION GOALS

Reach more homeowners and increase the number of loan workouts as the market dictates. The consistent upward trend in the number of loan work outs made by servicers over the last several months is expected to continue throughout 2009.
HOPE NOW and its members are committed to do even more in 2009 to keep homeowners in their homes and out of foreclosure. Through an increase in outreach efforts and loan work outs, a focus on community stabilization and a standardized loan level data collection process HOPE NOW will be prepared to meet the challenges of the ever-changing economy and market

Continue with extensive and diverse outreach events in 2009 by replicating models of the most successful events, such as in Boston, where Hope Now partnered with the Federal Reserve Bank of Boston at Gillette stadium and more than 2,000 homeowners received help.

Create loan-level template and data base for aggregate foreclosure prevention data. HOPE NOW will also continue to work to establish uniformity and report key information about the market.

Real Estate Owned (REO) Property/Community Stabilization: Improve the process, transparency and communication around REO properties.

Work with the new Administration, Treasury, HUD, legislators and regulators to continue the focus on eliminating “preventable” foreclosures and reporting information accordingly.

December 24, 2008

Press Briefing by Deputy Press Secretary Tony Fratto
James S. Brady Press Briefing Room

MR. FRATTO: Good morning, everyone. Sorry I'm late. The President taped his weekly radio address this morning. It's a Christmas message.

Q It's Tuesday.

MR. FRATTO: It is. But we make -- do it special for holidays, of course, and this Christmas message is a message of the spirit and courageous service of our troops, many of them who will be spending this holiday season as they've spent a number of previous holiday seasons away from their families, out in harm's way. And so that will be the President's message in the radio address.

The President, this morning, in a short while, will be signing H.R. 7311. This is the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008. We have stills coverage for this signing. This will be in the Oval Office. And we'll release a backgrounder, but just briefly, this has been a priority issue for the administration in preventing the trafficking of persons around the world. So this is a piece of legislation we're very proud to sign and to see that it's authorizing funding for fiscal years through -- 2008 through 2011. And this program has been very effective around the world in trying to stop trafficking in persons in Africa and Asia. So the President will sign that in a little while.

The President will also sign H.R. 7327, this is the Worker Retiree and Employee Recovery Act of 2008, generically referred to as the pension bill. The bill provides temporary short-term relief for businesses from their pension funding requirements under the Pension Protections Act. Those of you who may have followed this issue know that we did have some concerns with this bill because we think it will increase the cost of near-term claims on the Pension Benefit Guaranty Corporation -- the PBGC -- and could also result in some benefits lost to workers over the long term. Our concerns with the legislation remain, but we do believe that in this current economic environment and current economic circumstances, that the benefits of the legislation outweighed our objections.

And also, before leaving for Camp David -- I think you saw the schedule update, the President will now leave at 1:00 p.m., Carlton? -- leave at 1:00 p.m. The President will meet with, as he does from time to time, meet with a child with a life-threatening illness and this is part of the program set up by the Make A Wish Foundation.

As I said, the President will be heading to Camp David at 1:00 p.m. As you know, he has spent every Christmas at Camp David as President. He may have also spent, we think, all four Christmases at Camp David when his father, President George H.W. Bush, was President. We're not exactly sure if every day, but maybe -- this may be the 12th time that the Bush family has spent at Camp David for Christmas. So the President and his family are looking forward to that.

The President's parents, President and Mrs. Barbara Bush, will be there. The daughters, Barbara and Jenna, and Jenna's new husband, Henry, will be there. The President's siblings and their families will also be there. So we wish them well as they travel on to Camp David.

And with that, I'll be happy to take your questions. Ben.

Q Tony, 28 days left if my math is right. I'm curious what the President wants to get done before he leaves office. Beyond ensuring a smooth transition, what's left for the President?

MR. FRATTO: Well, assuring the smooth transition is the single most critical effort that we'll have underway over the next four weeks. It's important for the nation, it's important that the next President, President-Elect Obama, come in in a smooth way and ready to -- as we've said, we don't want to drop the baton, we don't want to break stride, we want them to be able to hit the ground running and to be able to be successful.

In those areas of the transition that include some really important efforts that are underway, that include the global war on terror, so we want to continue to see progress in what we're trying to do in Afghanistan and Iraq. And then also the most immediate concern here domestically is the financial crisis and making sure that the programs that are underway will be able to continue, and that we continue to try to normalize conditions in credit markets so the banks can be out there lending to consumers and businesses, and as quickly as possible try to return the economy to normal.

Q The administration has indicated that the President is unlikely at the last minute to issue a batch of pardons. I'm wondering if --

MR. FRATTO: No, I don't think we've indicated that. I mean, I think we've --

Q Well, I've been told that.

MR. FRATTO: You have? (Laughter.)

Q Yes. (Laughter.)

MR. FRATTO: One of those unnamed sources somewhere?

Q Yes, I think it was named. The key was that at the last minute on the way out the door. I'm curious if you expect another round of pardons or commutations before the President leaves office.

MR. FRATTO: We do expect additional clemency requests. The President has been considering them, and hopefully soon we'll have something for you on that. I can't tell you that -- when exactly the next one will come -- the next batch will come and whether there will be more after that. I think the President has maintained his authority to do that until his last day as President. So we're not going to -- I don't think we'll take that away from him. But I think we should have something soon on clemency petitions.

Q Would you expect it this week, Tony?

MR. FRATTO: I'm not going to put a point on that. The process is run from the Office of the Pardon Attorney over at the Department of Justice. Any announcement, as they all have, will come from the Department of Justice. So I would just stay ready to look for that paper to come across.

Toby.

Q GDP third quarter shrank 0.5 percent. What is the outlook beyond that? Is that the worst of it, or is it going to just get worse?

MR. FRATTO: Well, of course, that's looking backwards, and it's certainly not the worst of it. That was for the months -- the late summer, early fall months were the third quarter. And that was a quarter where we definitely saw a significant slowing in the economy. The economy in the previous quarter, in the second quarter, had grown at about 3 percent, which is fairly healthy. And we saw the economy slow down that quarter. We also saw impacts from the hurricanes that hit the southern part of the United States, the impact of the Boeing strike. In effect, I think our estimates from the Council of Economic Advisers estimates that that -- those two events, the hurricanes and the Boeing strike combined probably knocked about a full percentage point off of GDP. So we may have seen positive growth in that quarter were it not for those events.

That's the third quarter. The fourth quarter we know, because of the credit crisis, the standstill in credit as markets froze up, and the financial market turmoil, will be significantly weaker. I think you have private sector forecasts out there that -- you can look up the ranges for what they're estimating. But there's absolutely no question the fourth quarter is going to be a very weak quarter. We see that already in the monthly payroll data that has been reported already.

So it's a tough quarter, there's no question about it. What we've been focused on is implementing the financial rescue package and the efforts of the Fed to restore growth, to free up credit so that the economy can return to more normal practices and get healthy again. And that's the most important thing we can do right now.

Q Tony, obviously the President is not going to have any press conferences this year, for the remainder of the year. But in 2009 will he commit to having one before he leaves office? Can he at least --

MR. FRATTO: The truth is we get asked about this a lot, and I think I was asked about it yesterday and noted the number of interviews the President does, and he may do some additional interviews.

The secret about presidential press conferences is we never make the final decision until the day of. There's always lots of speculation, I know, on the part of all of you when you see a day on the -- without public events, and we begin getting calls wondering if there's going to be a press conference. We'll make those decisions as we get into the new year, whether we see a good reason and an opportunity to do one. But those are game day decisions and so we'll have to wait until the day.

Q Another issue; any concerns about this apparent coups in Guinea? I don't know if you've been tracking it or not.

MR. FRATTO: Obviously we've seen some of the reports on that. Some of the reporting is a bit murky. We're working with our partners in the region and other countries in the region and the African Union to encourage the institutions in Guinea to take all steps to ensure a peaceful and democratic transition. We stand with the people of Guinea, who certainly strive for peace and a democratic transition, and an opportunity to get to a next government in the best way. It's obviously a troubled region with a history that hasn't always seen those kinds of smooth transitions of power.

And so we're keeping an eye on it. I'll refer you to the State Department; they'll have more up-to-date information as to events there. But we are working with the African Union, and the other countries in the region.

Roger.

Q On that same topic, is there anything specific that the U.S. is doing to influence the successor government, anything you could point to?

MR. FRATTO: Just our communications with countries in the region, and that's all I can point to right now. And like I said, I'd refer you to the State Department for more on that.

Yes, John.

Q Thank you, Tony. Two questions. On Friday, Congressman Peter Roskam of Illinois, a Republican, told me that the President made a mistake in supporting the bailout of the automobile industry, that it doesn't address the fundamental issue of restructuring. And this is a complaint that came from other quarters -- Republican Leader Boehner in the House, and outside Congress -- Grover Norquist, of Americans for Tax Reform, was highly critical of the President. Is the President aware of these criticisms from people in his own party?

MR. FRATTO: Sure, we're aware of them. We've heard these criticisms. I think there's no -- I think we would respectfully disagree with them, with all of the members of Congress who have had that kind of criticism, especially when you look back at our record on this issue, which has always been about trying to ensure that there is a real, meaningful restructuring of the auto industry if we were going to use taxpayer funds. That's why we wanted the legislation from Congress, to ensure that, that it had the force of statute behind it, that it came from funds that were already appropriated by Congress for the auto industry.

This loan agreement that we put together -- again, I would respectfully disagree. If you read through it, everything in this agreement is about encouraging meaningful concessions by all parties to make the reforms that they need to make so that the firms could be viable and competitive in the future, and that the taxpayer can be paid back. It's all about restructuring. And it has at the back end of it, should the stakeholders not take the steps that they need to make, the ability to call the loan and the firms go into bankruptcy court.

So, look, this isn't the preferred way of dealing with this issue. We asked Congress for the strong authority to do it in partnership with Congress. We were able to achieve majorities in both houses of Congress on the approach that we were advocating and the approach that we designed, to do it in the most appropriate way.

Congress failed to get that legislation to the President's desk, and so we were left with sub-optimal ways of dealing with the auto industry, and we've made the best of it. And we have a very strong agreement. We think that it's something that, if all the stakeholders and the next administration adhere to, will result in strong and meaningful restructuring of the auto industry and they will be able to be successful. Now, again, that wasn't our preferred or the most appropriate way to deal with it, but it's the option that we had left.

Q My other question is this: Last year -- or two years ago, rather, the Bush White House recommended and the Republican National Committee agreed to the naming of Mike Duncan as national chairman. He is now seeking another term as national chairman against six other Republicans. Does the President support Chairman Duncan for another term as chairman?

MR. FRATTO: I don't think we are getting involved in the race for the next RNC chairman. I haven't had that conversation with the President to see what his personal views are, or our political director, Barry Jackson -- but I think I could check in with them and see if I can get back to you on that.

Paula.

Q You talked about hoping that existing programs continue to deal with the financial crisis. Well, there was a report out on HOPE NOW that about half of those who benefitted in that program are now facing foreclosure again. Do you think the program can be modified in any way?

MR. FRATTO: I think what that report reflects is the incredible complexity of trying to help individual Americans who are facing these difficulties. I think you have lots of people out there with ideas for how to prevent foreclosures and to mitigate foreclosures and reduce the number of foreclosures out there.

At the end of the day what you're dealing with are individual American homeowners holding a mortgage who are trying to -- want to stay in their home, they may have uncertain economic futures, they're uncertain about the value of their home; you have banks who don't want to foreclose on homes --that's not a good business practice for banks. But trying to make that system work is very difficult and complicated. And we've heard lots of ideas, ideas from the FDIC, ideas from outside economists, we have our own ideas, I'm sure the next administration will have ideas. And what you find as you work through all of these foreclosure mitigation programs is that they have strengths and weaknesses, and not one of them is perfect. If there was a perfect program out there, I think we would have implemented it already.

So it's difficult; we're trying to get at that problem a variety of different ways, through programs like FHASecure over at the Federal Housing Administration. I think there's been some reporting recently about the difficulties of trying to implement Congress's designed program, the Hope for Homeowners legislation that they passed last summer. It's a difficult problem to get at, but we're trying -- and the HOPE NOW Alliance of bankers and lenders and mortgage counselors are trying, as well.

So, you're right, a lot of the people who will be helped will find themselves back in default status. That's a reality that we all have to deal with as we try to work through it.

Q And also, this weekend, there was a new task force announced by the Obama transition that would deal with working families. The administration itself has got a lot of task forces, from energy to strengthening Social Security, reforming the tax code. Do you think this is an effective way to try --

MR. FRATTO: I'll speak about our task forces and the efforts that we've done, and leave you all to analyze the decisions by the incoming administration.

Q I would like to ask about possible support of Europeans for closing down Guantanamo. There was a story in today's Washington Post, and there's an awful lot of debate in my country. Has your administration asked Germany to take detainees from Guantanamo and be -- in the case of relatively innocent or harmless people -- like the Bosnia Algerians, which have now been released -- if they can be released to European countries, couldn't they also be released to the United States?

MR. FRATTO: You know, I'm not going to speak to our specific conversations with certain countries. I think I'll just make a general statement on this. We've been -- we have had communications with countries all across the world -- allies and countries from regions where a lot of the detainees come from -- to try to resettle them and to ensure that they are treated humanely and safely.

The President has said a number of times that it's our intention to close Guantanamo. I think what many people are realizing -- as they take a closer look at it and look at the efforts to try to resettle detainees, to try to deal with and bring to justice the high-value detainees, the very dangerous, most dangerous terrorist suspects that we're holding at Guantanamo -- that it's complicated. There are legal concerns, there are cross-border concerns in any of the countries that may consider taking detainees. They have their own legal systems that need to be considered. And we have to consider the expected safety and treatment of any of the detainees that we release from our custody.

So it has taken a lot longer than any of us would have wanted to try to deal with them. We continue to move forward with the military commissions for a number of high-value detainees, and that's the way that we're going to continue to deal with it. If there are countries out there that are willing to take them and they meet those standards, in terms of the treatment of detainees, we certainly want to talk to them and we have been talking to a lot of them.

Q And consideration to release them into the U.S. --

MR. FRATTO: That's not an option that we think is good for this country. These are enemy combatants that were picked up off the battlefield and I think in almost every case they've been shown to have had training and relationships with terrorist organizations, at the very least. So there's a reason we're holding them; there's a reason we're holding them where we're holding them. And we don't think releasing them to the United States is the most appropriate solution in whatever form.

Goyal.

Q Two questions, Tony, thank you. One, you think the President is regret or disappointed that we still don't have Osama bin Laden, because he has been trying for the last -- right after 9/11? And --

MR. FRATTO: I wouldn't say "regret." I mean, we're disappointed that we haven't caught Osama bin Laden, but we're certainly going to continue to do that until our very last day here, to try to catch Osama bin Laden.

Q Many people around the globe are really asking that the war is the largest military power or sophisticated -- all the weapons that you have. If the U.S. cannot, than who will? And President-Elect Obama said that if he's told where he is, and many people know where he is, and he will get him. So how do you think the President-Elect Obama will get and President Bush could not?

MR. FRATTO: I'm not going to speak for the Obama administration. You can ask them what they're -- how they intend to do that. If it was easy, it would be done. I remind you that these are large and difficult parts of the world where these terrorists are hiding. I'll also remind you that we've had fugitives from the law here in our own country that have escaped justice in the United States for many years. I mean, the Unabomber was in the United States hiding for a decade before the FBI could find them. And so it's difficult. But we're going to try to hunt down every one of them.

Q As far as the Mumbai attacks -- still on the streets of India -- Mumbai attack people are on the streets of India -- and now there's a high tension between India and Pakistan on the border. Do you think the President has spoken with anybody? Because war could break any time.

MR. FRATTO: I don't know if President Bush has. I know Admiral Mullen is in the region, and he's speaking to people in the region. But I don't have anything new for you in terms of the President's conversations.

One last one in the back of the room.

Q Thank you. Could you please speak to the U.S.'s consideration of moving troops into Basra, which is seen as pretty stable, and taking over from the British troops? I mean, aren't we supposed to be easing out of the country? And what --does this kind of send a message to the Iraqi people as they just passed the SOFA?

MR. FRATTO: I really have to apologize. I'm not familiar with our troop placements in Iraq right now, and what the latest is on that. Maybe you could check in with Ben Chang here and Ben can maybe give you something. Ben, who is with the National Security Council, can help.

Okay, thank you.

Q Happy holidays.

FEDERAL HOUSING FINANCE AGENCY
NEWS RELEASE
FOR IMMEDIATE RELEASE
November 11, 2008

Statement of FHFA Director James B. Lockhart [about STREAMLINED MODIFICATION PROGRAM]

Welcome. I am pleased that you are able to be here. I would also like to welcome Brian Montgomery, HUD Assistant Secretary and FHA Commissioner; Neel Kashkari, Interim Assistant Treasury Secretary for Financial Stability; Faith Schwartz, Executive Director of HOPE NOW and Michael Heid, Wells Fargo. As a Navy veteran, I do not like interfering with your Veterans Day, but as you all know there is a battle going on in the housing market.

As housing prices have fallen, delinquencies on mortgages have tripled, not just for subprime and Alt-A, but also for prime mortgages. Foreclosures have increased almost 150% from two years ago. Foreclosures hurt families, their neighbors, whole communities and the overall housing market. We need to stop this downward spiral.
Today we are announcing a major program designed to greatly reduce preventable foreclosures with a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford. It is an achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all work together.
As the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks), the Federal Housing Finance Agency (FHFA) strongly supports the Enterprises’ leadership role in setting industry standards for assisting “at risk” borrowers who could lose their homes to foreclosure. This streamlined modification program with uniform eligibility requirements will be supported by a consistent, efficient process approved by key industry participants. This program resulted from a unified effort among the Enterprises, Hope Now and its twenty-seven servicer partners, the Department of the Treasury, the Federal Housing Administration (FHA) and FHFA.
In developing this program, we have drawn on the FDIC’s experience and assistance, and have greatly benefited from the FDIC’s input.

Fannie Mae and Freddie Mac own or guarantee almost 31 million mortgages, about 58% of all single family mortgages. Although these mortgages only represent 20% of serious delinquencies, I believe their leadership role combined with the many partners of HOPE NOW should spread this approach throughout the whole mortgage loan servicing business. The performance of private label mortgage backed securities that were sliced and diced and sold to investors is just the opposite of Fannie Mae’s and Freddie Mac’s. Private label securities represent less than 20% of the mortgages but 60% of the serious delinquencies. As the regulator of the housing GSEs that own over a quarter of a trillion dollars of private label securities, I ask the private label MBS servicers and investors to rapidly adopt this program as the industry standard. Not only will this streamlined program assist borrowers, but broad acceptance and effective implementation could stabilize communities and property values.
The program targets the highest risk borrower who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed for bankruptcy. To be considered for the program, a seriously delinquent borrower should contact his or her servicer and provide the requested income information. The program creates a fast-track method of getting troubled borrowers to an affordable monthly payment where “affordable” is defined as a first mortgage payment, including homeowner association dues, of no more than 38 percent of the household’s monthly gross income. This affordable payment will be achieved through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payment on part of the principal. Servicers will have flexibility in the mix used to get there, but the goal is to create a more affordable payment.

If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation through a customized process. The key to success is the borrower’s ongoing cooperation and communication with the servicer. Borrowers shouldn’t fear working with servicers. They have dedicated personnel who are experienced in working with borrowers who are struggling with finances, but who are eager to keep their homes.

The streamlined modification program complements existing loss mitigation programs. We expect that it could significantly increase the number of modifications completed. Borrowers who participate will be strongly encouraged to seek financial counseling through HUD-approved agencies – particularly, if the default is a result of being overextended or due to financial mismanagement.
Fannie Mae and Freddie Mac will soon issue specific guidance to their servicers implementing this program requiring implementation by December 15th. To encourage participation, servicers will receive a fixed payment of $800 for each loan modified through this program.

Troubled borrowers eligible for this program have already experienced significant erosion in their credit scores, making them unlikely to obtain mortgage credit, through typical means. Many also lack equity in their homes. This streamlined program is meant to reach as many of these borrowers as possible to give them a chance to save their homes and begin restoring their credit. The borrowers’ ultimate obligation to repay his or her current mortgage does not change.

Regrettably, there are many American families in this situation. This unified effort on the part of the Fannie Mae, Freddie Mac, private lenders and servicers, and the Federal agencies represented here is a bold attempt to move quickly in defining a nationwide program that can quickly and easily reach many of these troubled borrowers, thereby stabilizing those families and the communities and neighborhoods in which they live.
Thank you and now I will turn it over to Faith Schwartz.

QUESTIONS AND ANSWERS ON THE STREAMLINED MODIFICATION PROGRAM

Q: What is a modification?
A: A modification is a change to the original mortgage terms. It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance. The change/s is made to create a more affordable payment for the borrower.

Q: What is a streamlined modification?
A: A streamlined modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.

Q: What is the benchmark ratio?
A: This is the first time the industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget.

Q: Who participated in creating the Streamlined Modification Program? Is this identical to the FDIC’s IndyMac protocol?
A: This program resulted from a unified effort among the Enterprises, Hope Now and its twenty-seven servicer partners, Treasury, the Federal Housing Administration (FHA) and FHFA. In addition, we’ve drawn on the FDIC’s experience and assistance from developing the IndyMac streamlined approach and have greatly benefited from the FDIC’s input and example. To accommodate the need for more flexibility among a larger number of servicers, the Streamlined Modification Program does differ from the IndyMac model in a few areas. However, it uses the same fundamental tools to achieve the same affordability target.

Q: How is this different from Citi’s announcement today?
A: This effort compliments efforts of those banks that have mortgage portfolios and can reach out directly to borrowers for loans they own and service. This is a significant announcement in that Fannie Mae, Freddie Mac and FHFA have mutually agreed as major investors to a single streamlined modification program with a common affordability standard. The majority of HOPE NOW banks who own portfolio mortgages will adopt or offer programs as or more aggressive then what’s being announced.

Q: What is the role of HOPE NOW?
A: HOPE NOW has the leading servicers as members. HOPE NOW collaborated with Fannie Mae, Freddie Mac and FHFA on arriving at a standard that is consistent and addresses the capacity challenge for servicers dealing with increased delinquencies. This will take on-going work to implement for servicers. We anticipate this being implemented by December 15th.
Q: Why is there not a foreclosure moratorium?
A: Any borrower who qualifies and responds to the servicer will be given the opportunity to provide the required information for consideration. If necessary, the scheduling of a foreclosure sale will be suspended. A suspension requires that the borrower maintain contact, desires to keep his or her home, has the ability to make the affordable payment offered, and promptly respond to requests for information and signed documents.

Q: Why is it necessary?
A: With the rise in serious delinquencies and increasing number of loans in foreclosure, this program will help borrowers who have missed three or more payments, but want to keep their homes. Because the eligibility requirements and process are streamlined and consistent, the program will allow servicers to reach more borrowers more quickly.

Q: Who is eligible?
A: The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. The loan is a Freddie Mac, Fannie Mae or portfolio loan with participating investors. To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.

Q: Why must the borrower be 90 days delinquent? Why not earlier in the delinquency cycle?
A: This is a streamlined solution targeted to reach the most at risk borrower. For borrowers who do not qualify, other solutions are available. This in no way substitutes for the meaningful efforts by all servicers and investors that are currently in place. The 212,000 workouts reported by HOPE NOIW in September are testimony to that fact. We will continue to see those efforts produce meaningful results.

Q: How many people will this help?
A: While difficult to assess, it is clear delinquencies are predicted to continue well into 2009. Foreclosure estimates are significant. Having a streamlined approach will assist many borrowers who default and more quickly. We estimate this will ultimately help thousands of borrowers.
Q: What if a borrower is not eligible but still wants to save his/her home?
A: If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation via the standard process. The standard modification program requires a personal cash-flow budget customized to the borrower’s situation.

Q: How do borrowers apply?
A: To be considered for the program, a seriously delinquent borrower should contact his or her servicer and provide the requested information – monthly gross household income, association dues and fees, and a hardship statement.
Q: How do borrowers complete the modification process?
A: Upon receiving the Modification Agreement from the servicer, the borrower signs it and returns it with the 1st payment at the modified terms along with income verification. Once the borrower makes three payments at the modified terms and the account is current as of day 90 of the modified plan, the modification is complete.

Q: What are the goals of the program?
First, we hope that other industry participants -- portfolio lenders and representatives of private label security investors – readily and rapidly adopt this program as the industry standard. Second, the program could increase the number of modifications significantly. Third, broad acceptance and effective implementation could stabilize communities and property values.

Q: When will servicers start offering this program?
A: We expect that by December 15th, servicers will be positioned to work with eligible borrowers.
Q: Will servicers get more details on this program?
A: Both Fannie Mae and Freddie Mac will be communicating directly with their approved servicers through an announcement, letter or bulletin.

Links:
Hope Now http://www.hopenow.com/
HUD http://www.hud.gov/foreclosure/

November 25, 2008

Report of HopeNOW Alliance

Mortgage Industry Prevented Record-High
225,000 Foreclosures In October

Almost 2.7 Million Foreclosures Prevented Since July 2007
Washington, D.C. (November 25, 2008) – HOPE NOW, the private sector alliance of mortgage servicers, counselors, and investors that has been working aggressively to prevent foreclosures and keep homeowners in their homes, today announced that the mortgage industry prevented 225,000 foreclosures in October 2008, 13,000 more than the record set last month.

Approximately 1.7 million foreclosures have been prevented by the mortgage lending industry in the first 10 months of 2008, more than the approximately 1.5 million prevented in all of 2007. If the current trend continues, in 2008 the mortgage lending industry will prevent more than 2.2 million foreclosures, 45 percent more than in 2007. Since July 2007, almost 2.7 million foreclosures have been prevented.

According to Faith Schwartz, HOPE NOW’s executive director, the October results show that the industry’s success at preventing foreclosures and keeping homeowners in their homes is accelerating. “Our efforts to streamline the foreclosure prevention process are clearly working,” she said. “HOPE NOW members are helping more homeowners avoid foreclosure than ever before.”

In October, mortgage servicers helped prevent foreclosures by completing 225,000 mortgage workouts, which include both modifications to the terms of existing mortgages and payment plans. Barring an unforeseen life event such as a job loss, death, or illness, all workouts are intended to enable a homeowner to remain in his or her home as long as he or she wishes to do so.
The 103,000 mortgage modifications and 122,000 payment plans completed in October set new monthly records in each category. Over the past three months, the number of modifications has increased by 24 percent while the number of payment plans has increased by 9.8 percent. This increasing reliance on modifications rather than payment plans is expected to continue as economic conditions warrant.

“The growing use of loan modifications is not an accident,” Schwartz said. “The U.S. economy is still troubled and that means that changing the terms of a loan is an increasingly appropriate way to keep more homeowners in their homes. HOPE NOW members are likely to continue to consider them as long as the broader economy continues to struggle.

The HOPE NOW October data also shows:

• For the first time, HOPE NOW members and the broader industry prevented more than 200,000 foreclosures in two consecutive months.
• Nearly 31 percent of the homeowners with prime loans who received workouts in October received modifications.
• Nearly 57 percent of the homeowners with subprime loans who received workouts in October received modifications.
• The number of foreclosures leveled off in October. The number of foreclosures started was approximately the same in October as in September.
• October foreclosure starts were below the monthly amount recorded April through August and at the same level as those recorded last February and March.
• For the fifth month in a row, the number of foreclosure starts for prime loans exceeded those for subprime.
• Home loans 60-plus days delinquent now represent 4.3 percent of outstanding mortgages and are increasing the fastest in the prime loan category.
A summary table of the results is attached and can be found at http://www.hopenow.com/media/press_release.php.

ABOUT HOPE NOW

HOPE NOW is the alliance of mortgage market participants, mortgage servicers, and counselors that is working to help as many homeowners as possible avoid foreclosure and stay in their homes. For more information, including a full list of members, go to www.hopenow.com HOPE NOW coordinates a nationwide campaign to reach homeowners who may be at risk of losing their homes. So far, HOPE NOW has sent nearly two million letters to these homeowners. About 17 percent of homeowners receiving the HOPE NOWcoordinated letters have contacted their servicer, 6 times more than the routine 2-3 percent response rate servicers receive when they send their own mailings.

Since March 2008, HOPE NOW has connected thousands of homeowners with their lender and/or a HUD-certified housing counselor at workshops in 27 cities. Additional workshops are being scheduled around the country. In addition, HOPE NOW members have agreed to make substantial additional efforts to contact homeowners whose mortgages will reset in the coming months and to further expedite the process used to determine how best to keep them in their homes. The Homeownership Preservation Foundation, a HOPE NOW member, operates the
Homeowner’s HOPE™ Hotline, which is available 24 hours a day, 7 days a week, and 365 days a year. The Homeowner’s HOPE™ Hotline receives an average of more than
6,000 calls a day. There is no cost to homeowners for contacting a nonprofit counselor by calling 1-888-995-HOPE

November 11, 2008
HP-1264

Treasury Interim Assistant Secretary for Financial Stability Neel Kashkari Remarks on GSE, HOPE NOW Streamlined Loan Modification Program

Washington- Stabilizing our financial system will require not only strengthening our financial institutions so they are able to lend to our communities, but also helping homeowners avoid preventable foreclosures. As Secretary Paulson has repeatedly said, there is no silver bullet to address the housing downturn. We are experiencing a necessary correction and the sooner we work through it, the sooner housing can again contribute to our economic growth. We must explore all tools to help homeowners and increase the availability of mortgage finance.

Since last year, Treasury has worked with leading housing counselors, mortgage servicers and investors through the HOPE NOW Alliance to reach and help homeowners who both want to keep their homes and have the basic financial wherewithal to do so. In that time, industry and government have developed several new tools to help homeowners. The industry is now helping over 200,000 homeowners a month avoid foreclosure with a loan workout.

Today's announcement by FHFA, the GSEs, and HOPE NOW is an important step forward to make sure the system has capacity to help all qualifying homeowners who are reaching out for help. We commend FDIC Chairman Sheila Bair for her leadership in developing a systematic loan modification protocol at IndyMac Bank. FHFA, the GSEs and HOPE NOW relied heavily on the IndyMac model in developing this new protocol. With such broad adoption, this new protocol will be a standard for the industry to quickly move homeowners into long-term sustainable mortgages.

The adoption of this streamlined modification framework is an additional tool that servicers will now have to help avoid preventable foreclosures. This framework will not only help those homeowners who receive a streamlined modification, it will also further address servicer capacity concerns by freeing up resources, helping ensure that borrowers do not fall through the cracks because servicers aren't able to get to them.

We commend Director Lockhart and FHFA along with Fannie Mae and Freddie Mac for taking the lead in developing and adopting this streamlined approach to loan modifications and helping establish these important new industry standards. We also commend Hope Now for their continued leadership in bringing the industry together for a common solution. It is important to note the powerful example large lenders are providing by applying this protocol to their own mortgage portfolios.

The Treasury Department is committed to continuing to take strong action to stabilize our financial system and we welcome this important announcement to help homeowners avoid preventable foreclosures.

President Bush - Plan to Relief the Financial Crisis

October 14,2008

Good morning. I just completed a meeting with my working group on financial markets. We discussed the unprecedented and aggressive steps the federal government is taking to address the financial crisis. Over the past few weeks, my administration has worked with both parties in Congress to pass a financial rescue plan. Federal agencies have moved decisively to shore up struggling institutions and stabilize our markets. And the United States has worked with partners around the world to coordinate our actions to get our economies back on track.

This weekend, I met with finance ministers from the G7 and the G20 -- organizations representing some of the world's largest and fastest-growing economies. We agreed on a coordinated plan for action to provide new liquidity, strengthen financial institutions, protect our citizens' savings, and ensure fairness and integrity in the markets. Yesterday, leaders in Europe moved forward with this plan. They announced significant steps to inject capital into their financial systems by purchasing equity in major banks. And they announced a new effort to jumpstart lending by providing temporary government guarantees for bank loans. These are wise and timely actions, and they have the full support of the United States.

Today, I am announcing new measures America is taking to implement the G7 action plan and strengthen banks across our country.

First, the federal government will use a portion of the $700 billion financial rescue plan to inject capital into banks by purchasing equity shares. This new capital will help healthy banks continue making loans to businesses and consumers. And this new capital will help struggling banks fill the hole created by losses during the financial crisis, so they can resume lending and help spur job creation and economic growth. This is an essential short-term measure to ensure the viability of America's banking system. And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors.

Second, and effective immediately, the FDIC will temporarily guarantee most new debt issued by insured banks. This will address one of the central problems plaguing our financial system -- banks have been unable to borrow money, and that has restricted their ability to lend to consumers and businesses. When money flows more freely between banks, it will make it easier for Americans to borrow for cars, and homes, and for small businesses to expand.

Third, the FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts. These accounts are used primarily by small businesses to cover day-to-day operations. By insuring every dollar in these accounts, we will give small business owners peace of mind and bring stability to the -- and bring greater stability to the banking system.

Fourth, the Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper. This is a key source of short-term financing for American businesses and financial institutions. And by unfreezing the market for commercial paper, the Federal Reserve will help American businesses meet payroll, and purchase inventory, and invest to create jobs.

In a few moments, Secretary Paulson and other members of my Working Group on Financial Markets will explain these steps in greater detail. They will make clear that each of these new programs contains safeguards to protect the taxpayers. They will make clear that the government's role will be limited and temporary. And they will make clear that these measures are not intended to take over the free market, but to preserve it.

The measures I have announced today are the latest steps in this systematic approach to address the crisis. I know Americans are deeply concerned about the stress in our financial markets, and the impact it is having on their retirement accounts, and 401(k)s, and college savings, and other investments. I recognize that the action leaders are taking here in Washington and in European capitals can seem distant from those concerns. But these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover.

It will take time for our efforts to have their full impact, but the American people can have confidence about our long-term economic future. We have a strategy that is broad, that is flexible, and that is aimed at the root cause of our problem. Nations around the world are working together to overcome this challenge. And with confidence and determination, we will return our economies to the path of growth and prosperity.

Thank you.

END 8:08 A.M. EDT
October 14,2008

To read the latest Foreclosure Bill Rescue please go to this other page. There you can see also if you qualify . click here

President's Address to the Nation
Sept 24, 2008 9:01 P.M. EDT

THE PRESIDENT: Good evening. This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money.

We're in the midst of a serious financial crisis, and the federal government is responding with decisive action. We've boosted confidence in money market mutual funds, and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I've proposed that the federal government reduce the risk posed by these troubled assets, and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending.

This rescue effort is not aimed at preserving any individual company or industry -- it is aimed at preserving America's overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America's financial system is back on track.

I know many Americans have questions tonight: How did we reach this point in our economy? How will the solution I've proposed work? And what does this mean for your financial future? These are good questions, and they deserve clear answers.

First, how did our economy reach this point?

Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions -- along with low interest rates -- made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition -- some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.

These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice: To step in with dramatic government action, or to stand back and allow the irresponsible actions of some to undermine the financial security of all.

I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

Fellow citizens: We must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem -- and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans, and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill.

I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money. I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. But given the situation we are facing, not passing a bill now would cost these Americans much more later.

Many Americans are asking: How would a rescue plan work?

After much discussion, there is now widespread agreement on the principles such a plan would include. It would remove the risk posed by the troubled assets -- including mortgage-backed securities -- now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses. Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan's implementation. And it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday. First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. In the short term, this will free up banks to resume the flow of credit to American families and businesses. And this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply. Yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold. And we expect that much, if not all, of the tax dollars we invest will be paid back.

A final question is: What does this mean for your economic future?

The primary steps -- purpose of the steps I have outlined tonight is to safeguard the financial security of American workers and families and small businesses. The federal government also continues to enforce laws and regulations protecting your money. The Treasury Department recently offered government insurance for money market mutual funds. And through the FDIC, every savings account, checking account, and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit -- and this will not change.

Once this crisis is resolved, there will be time to update our financial regulatory structures. Our 21st century global economy remains regulated largely by outdated 20th century laws. Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system.

Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability. There are other good ideas, and members of Congress should consider them. As they do, they must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow.

In the long run, Americans have good reason to be confident in our economic strength. Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity, and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

Our economy is facing a moment of great challenge. But we've overcome tough challenges before -- and we will overcome this one. I know that Americans sometimes get discouraged by the tone in Washington, and the seemingly endless partisan struggles. Yet history has shown that in times of real trial, elected officials rise to the occasion. And together, we will show the world once again what kind of country America is -- a nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.

Thank you for listening. May God bless you.

END 9:14 P.M. EDT

President Bush Outlines Five Measures To Address The Nation's Financial Challenges

On September 19, 2008, President Bush outlined decisive government action to preserve and sustain America's financial system and economy. This is a pivotal moment for America's economy. Problems that originated in the credit markets – and first showed up in the area of subprime mortgages – have spread throughout our financial system. As a result, the government is acting now to protect our Nation's economic health from serious risk.

Our Economy Faces Unprecedented Challenges, So We Are Responding With Unprecedented Action

The Federal Government should intervene in the marketplace only when necessary; in today's financial market, government intervention is essential. In recent weeks, the Federal Government has taken a series of measures to help promote stability in the overall economy. But more action is needed. We must address the root cause behind much of the instability in our markets – the mortgage assets that have lost value during the housing decline and are now restricting the flow of credit. Therefore, after consulting closely with Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and Securities and Exchange Commission Chairman Christopher Cox, President Bush outlined the following five actions:

1. The Administration will work with Congress to pass legislation approving the Federal government's purchase of difficult–to-sell assets, such as troubled mortgages, from banks and other financial institutions. This is a decisive step that will address underlying problems in our financial system. It will help take pressure off the balance sheets of banks and other financial institutions, and it will allow them to resume lending and get our financial system moving again. The President appreciates the willingness of Congressional leaders to confront this situation head on. While we work with Congress to pass legislation, the Treasury will take immediate action to provide additional funding to mortgage markets by increasing Treasury purchases of GSE mortgage securities. The President believes we must join together to move the urgently needed legislation as quickly as possible, without adding controversial provisions that could delay action.

2. The Treasury Department is acting to restore confidence in a key element of America's financial system – money market mutual funds. Recent stresses on the markets have caused some to question whether these investments are safe and accessible, so the Treasury Department has established a temporary guarantee program to ensure that investors are compensated in the unlikely event that a money market fund must liquidate. For every dollar invested in an insured fund, you will be able to take a dollar out. To participate, money market funds must opt in and pay a fee. The President has approved the use of up to $50 billion through the existing Exchange Stabilization Fund. Concerns about the value of money market funds falling below the amount invested in them have exacerbated global financial market turmoil. Without this guarantee program, there would be a substantial risk of heightened global instability.

3. The Federal Reserve is also taking steps to provide additional liquidity to money market mutual funds, which will help ease pressure on our financial markets. These measures will ensure the functioning of the financial markets and support the flow of credit to households and businesses. The Federal Reserve will foster liquidity in the asset-backed commercial paper and money markets by extending loans to U.S. depository institutions and bank holding companies to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds. The Federal Reserve will further enhance market liquidity by purchasing short-term obligations issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

4. The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain. The SEC is also requiring certain investors to disclose their short selling and has launched rigorous enforcement actions to detect fraud and manipulation. Anyone engaging in illegal financial transactions will be caught and prosecuted. Short selling increases liquidity in the market in normal market conditions but may currently be contributing to sudden price declines. The new rules, effective immediately until October 2, prohibit short selling on 799 financial institutions.

5. The Administration looks forward to working with Congress on measures to bring greater long-term transparency and reliability to the financial system. This includes those in the regulatory blueprint submitted earlier this year by Secretary Paulson. Many of the regulations governing America's markets were written in a different era, patched together over the last 75 years in response to market conditions that may no longer exist. It is vital that we update them to meet the realities of today's global financial system. The current regulatory framework includes five Federal depository regulators, one Federal securities regulator, one Federal futures regulator, and insurance regulations that are mostly State-based, with more than 50 regulators. The Blueprint recommends instead creating a new objectives-based approach to regulation that includes a market stability regulator, a prudential regulator, and a business conduct regulator that focuses on consumer protection. These measures will entail risk, but the risk of not acting would have been far higher. Further stress on our financial markets would cause massive job losses, devastate retirement accounts, further erode housing values, and dry up loans for new homes, cars, and college tuitions. These are risks America cannot afford to take.

The Federal Government Is Taking Action To Restore Confidence In America's Financial Markets

In this difficult time, President Bush knows many Americans are wondering about the security of their finances. Every American should know that the Federal Government continues to enforce laws and regulations protecting your money. Through the Federal Deposit Insurance Corporation, every savings account, checking account, and certificate of deposit is insured by the Federal Government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit. This will not change.

In the long term, Americans have good reason to be confident in our economic strength. We have a flexible and resilient system that absorbs challenges, makes corrections, and bounces back. America has the most talented, productive, and entrepreneurial workers in the world. This country is the best place in the world to invest and do business. Consumers around the world continue to seek out American products, as evidenced by record-high exports.

August 8/2008

What are the results of Hope Now Alliance

Larry Gilmore, the deputy director of HOPE NOW, the private sector lending industry alliance of mortgage lenders, servicers, investors, and counselors that is helping homeowners avoid foreclosure, will testify Monday before the California Assembly’s Banking and Finance Committee regarding the significant progress the mortgage industry has made in foreclosure prevention in California.

Gilmore will emphasize the dramatic number of homeowners in both California and nationwide that HOPE NOW has helped avoid foreclosure through the alliance’s aggressive outreach and communications efforts. Since July 2007, HOPE NOW has helped nearly 140,000 Californians avoid foreclosure and remain in their homes.
Below is the full text of Gilmore’s testimony:

HOPE NOW is an unprecedented broad-based private industry collaboration among housing counselors, lenders, investors, and mortgage market participants that is achieving real results. We have 26 servicers, representing over 90% of the subprime market and 70% of the prime market. We also have every HUD-approved counseling agency as members. Since last fall, we have been working aggressively to address to housing issues related to foreclosure; the goal of HOPE NOW is to keep more people in their homes.

The result of these efforts culminated in the recently announced servicing guidelines:

1) Performance Measures and accountability: One of the most important components of the guidelines is that HOPE NOW servicers are committing to timelines to respond to homeowners and third party housing counselors. These timelines represent a powerful commitment from servicers.

Servicers will…

Respond to homeowners who have requested a loan work within 5 days,
Send homeowners an outline of key elements of the loss mitigation evaluation process,
Provide homeowners the status of their loan workout every 30 days,
Make homeowners affordability central to loss mitigation, and
Communicate with homeowners an approval or denial within 45 days.

HOPE NOW servicers agreed to adopt these guidelines within 60 days of their release.

2) Subordination of Second Liens: In accordance with investor guidelines, HOPE NOW servicers who hold second liens should re-subordinate their loans with respect to an existing first lien where the second lien holder’s position is not worsened as a result of a refinance or loan modification. This is to ensure that no homeowner loses the opportunity to keep his or her home when they 1) experience hardship, 2) submit information to stay in their home, 3) and can afford his or her home.

3) Solutions for Preventing Foreclosures: HOPE NOW servicers are committing to assisting homeowners through various foreclosure prevention options consistent with investor guidelines or approvals. Details of all relevant and available foreclosure prevention options are included in the servicer guidelines. This transparency around foreclosure prevention options is critical for homeowners, servicers and third parties for understanding all options that are available...

4) Commitment to Reporting: HOPE NOW servicers agree to track and report on performance to gauge industry progress towards reducing foreclosures and increasing options for distressed homeowners. From July 2007 through June 2008, approximately 1.9 million homeowners avoided foreclosure through loan workouts. Mortgage servicers helped approximately 181,000 homeowners in June 2008 alone. Subprime modification workouts have increased significantly as they now represent over half of all work outs, far above the 18% rate of modifications tracked in July 2007.

From July 2007 through June 2008, well over 138,000 California homeowners avoided foreclosure: over 94,200 received repayment plans and nearly 44,000 received loan modifications. Attached to my written testimony is more information about the HOPE NOW efforts in California.

Reporting on our progress is critical and we will continue to keep you updated on our efforts including more loan level reporting.

5) Reaching homeowners in Distress: Servicers commit to early 1) contact for subprime ARM borrowers who are facing a reset, 2) comprehensive nationwide outreach letter campaign for all “no-contact” borrowers who are 60 days or more delinquent, and 3) support of local homeownership preservation workshops. These workshops put at-risk homeowners directly in contact with servicers and housing counselors. In 120 days, we have partnered on 16 events, reached over 6,100 borrowers. In March, HOPE NOW hosted three homeownership events in California- Riverside, Anaheim, and Stockton. Partnering with Governor Schwarzenegger’s 90 Days of HOPE and Senator Barbara Boxer, HOPE NOW met with nearly one thousand borrowers at risk of foreclosure, connecting them to local HUD-certified counselors and their mortgage servicer. Due to Servicers and counselors being present together at these events, many borrowers are offered solutions on the spot. The reactions of homeowners who have attended these events are overwhelmingly positive and we look forward to reaching even more borrowers. Some survey results from homeowners are as follows: “It gave me hope that I will survive,” and “Without your help, we would have lost our home.”

Reaching “no-contact borrowers” remains a significant challenge
Our nationwide HOPE NOW letter campaign targeting borrowers 60+ days delinquent, over 1.85 million letters have been sent since November 2007. These letters produce an average response rate of 20 percent. That means the majority of no-contact borrowers remain at high risk of foreclosure. We ask this Committee and all policymakers to encourage their constituents to respond to these letters either by contacting their servicer, calling the Homeowner’s HOPE Hotline, 888-995-HOPE, or contacting a HUD-approved counseling agency.

To ensure that free, non-profit counseling be available for all homeowners in need, HOPE NOW has committed to pay a fee for foreclosure prevention counseling.

Conclusion

This is a serious committed effort that will continue until problems in the housing and mortgage markets abate. It is neither a silver bullet nor a magic solution but this effort will continue to complement the efforts of legislators and regulators as we work through these housing issues. We will also continue to be responsive and offer continuous improvement.

About HOPE NOW

HOPE NOW is an alliance of counselors, servicers, investors and other mortgage market participants. The Alliance maximizes outreach efforts to homeowners in distress to help them stay in their homes and avoid foreclosure. Since the Alliance was created in July 2007 over 1.9 million homeowners have been aided through workouts or loan modifications. The members of this alliance recognize that by working together, they are more effective than they would be working independently. For more information on HOPE NOW, and to see the full membership of the alliance, please visit www.HOPENOW.com.

July 30/08

President Bush Continues Pressing Congress To Approve Pro-Growth Economic Policies

The Administration Has Helped And Continues To Help Responsible Homeowners Across America

The President launched FHASecure, which has helped more than 250,000 families avoid foreclosure by refinancing into safe Federal Housing Administration (FHA)-insured mortgages. In April, FHA also announced a plan to expand the program to help even more families refinance their mortgages. This expansion will begin in July. In total, FHA expects to help about half a million families refinance by the end of the year.

The President and his Administration also helped facilitate formation of the private-sector HOPE NOW Alliance, which has developed multiple strategies to help distressed homeowners. By working together, participants in the mortgage industry have helped more than 1.7 million families stay in their homes since July 2007. HOPE NOW membership now covers more than 90 percent of the subprime mortgage market.

Upon returning from its recess, Congress should swiftly pass responsible legislation to modernize the FHA. A modernized FHA with appropriate pricing flexibility could help thousands by the end of 2008. Congress should also pass GSE reform to strengthen the regulation of Freddie Mac and Fannie Mae, ensuring they are adequately capitalized and focused on their statutory housing mission. A strong regulator can also ensure these enterprises do not place taxpayers at increased risk. On August 31, 2007, the day he announced the creation of FHASecure, President Bush made an urgent call to Congress to pass FHA modernization and GSE reform. Congress still has not sent the President legislation that he can sign. Every day that we wait, the problem gets worse, and more people go into foreclosure.

* While the President thinks there are good aspects to Congress' efforts to address the housing situation, he does have concerns. For example, Senate legislation that would ban risk-based pricing is a mistake. Moreover, the Senate bill would provide for $4 billion to states to purchase already foreclosed homes, which just helps banks, not people trying to stay in their homes. The Administration is working closely with Congress to try to improve the bill into something the President could sign.

March 28, 2008

President Bush Discusses Housing, Economy

THE PRESIDENT: Thank you very much. I really want to thank Congressman Chris Smith and Vito Fossella for joining me here in Freehold, New Jersey. I'm here at a company called Novadebt, and I really appreciate Joel Greenberg and Jill Feldman for giving me an opportunity to come to this center, this company, and talk with people whose lives are being positively affected as a result of a significant counseling effort to help people stay in their homes. And I really do want to thank you all for your hospitality.

President George W. Bush greets employees prior to making remarks Friday, March 28, 2008, at Novadebt in Freehold, New Jersey. White House photo by Chris Greenberg During my tour, I have met with skilled professionals who provide free mortgage counseling for struggling homeowners. And the reason why I'm here is because we have got a issue in housing in America. The value of the houses have gone down in some areas, and people's mortgages are resetting. In other words, the interest rates are going up. And that has caused consternation and concern and care. A lot of families are facing the frightening prospect of foreclosures. Foreclosures obviously place a terrible burden on a family, as well as they lead to losses for lenders and investors. And this affects our entire economy.

We have a role to play at the government level, and that is to help lenders and borrowers work together to avoid foreclosure. There's some homeowners who have made responsible buying decisions, and who could keep their homes with just a little help, some information and some help. And so to help them, in October my administration helped bring together a private-sector group of lenders, loan servicers, investors, mortgage counselors, which is called the HOPE NOW Alliance. And the members of this group have made some progress. First of all, they agreed to industry-wide standards to streamline the process for refinancing and modifying certain mortgages. HOPE NOW also runs a national hotline to connect struggling homeowners with mortgage counselors just like the folks here at Novadebt.

I also met with some homeowners who got help. Danny Cerchiaro is with us, from Iselin, New Jersey. Thank you for being here, Danny. He owns a home that also serves as a studio for his movie production business. Danny and his wife learned their adjustable-rate mortgage was resetting to a higher rate this past summer, and he became concerned about financial stability. He was worried about staying in his home. He needed a place for his business and he needed a place to sleep, and he became concerned about whether or not he could afford it.

He got -- he called HOPE NOW, and he became working with a mortgage counselor named Penny Meredith. Penny is here. Appreciate you coming, Penny. And in less than two months later, Penny helped Danny get a more affordable fixed-rate mortgage. Danny calls Penny -- and I quote -- "the magic lady." She helped him a lot.

And there's a lot of other Americans who can get the same kind of help. One of the reasons I've come today is to say to people who are worried about staying in their home, there is help available.

President George W. Bush delivers remarks on housing Friday, March 28, 2008, at Novadebt in Freehold, New Jersey. White House photo by Chris Greenberg I also want to thank Theresa Torres, from Kansas City, who is with us. She got really worried. She's a mom of three; her husband is a subcontractor. And she was very worried about staying in her home. And the family fell behind on their mortgage payments in December. But fortunately, she knew to call and to get help, and in this case, from Novadebt. They helped her modify her mortgage. And today, as a result of the help she received, she no longer worries about losing her home. And I thought her statement was pretty interesting -- she said, "I see my role today to serve as an example for people in a similar situation." So, Theresa, we're glad you're here.

There are hundreds of thousands of homeowners like Theresa and Danny who can benefit from calling HOPE NOW. And so one of my purposes is to make it clear there is a place where you can get counseling. And I want my fellow citizens, if you're worried about your home, to call this number: 188-995-HOPE [sic]. Let me repeat that again: 188-995-HOPE [sic].

HOPE NOW can help homeowners find the right solution. By the way, we got more work to do in Washington, and one of the things we can do is make sure the Federal Housing Administration gets the reforms it needs. And there's a program called FHASecure, which has given FHA greater flexibility to offer struggling homeowners with otherwise good credit histories a chance to refinance. This program is very helpful. It's, so far, helped 130,000 families refinance their mortgages. And by the end of the year, we expect the program to have reached 300,000 families.

This is a good start. We want to help people. We're committed to helping our fellow citizens. And I fully understand, as do most Americans, that the housing market problems are complicated and there's no easy solutions. But in the stories I've heard today I've seen how Americans are responding with compassion and determination. We will support them with good policies. We will help responsible homeowners weather a difficult period. And in so doing, we will strengthen the dream of homeownership.

Thank you all very much.

Danny just told me I've got to get the number right -- 1-888-995-HOPE.

Declaraciones del Presidente Sobre Vivienda ! ( Spanish - Espanol)

March 28, 2008

EL PRESIDENTE: Muchas gracias. Quiero agradecerles especialmente a los congresistas Chris Smith y Vito Fossella por acompañarme aquí en Freehold, New Jersey. Estoy aquí en una compañía llamada Novadebt, y mi sincero agradecimiento a Joel Greenberg y Jill Feldman por darme la oportunidad de venir a este centro, a esta compañía, y hablar con las personas que se han visto beneficiadas como resultado de los significativos esfuerzos de asesoría para ayudar a la gente a conservar sus casas. Y realmente deseo agradecerles a todos por su hospitalidad.

President George W. Bush greets employees prior to making remarks Friday, March 28, 2008, at Novadebt in Freehold, New Jersey. White House photo by Chris GreenbergDurante mi visita me reuní con profesionales expertos que proporcionan asesoría hipotecaria gratuita a los propietarios de vivienda en apuros. Y la razón por la cual estoy aquí es porque tenemos un problema con la vivienda en Estados Unidos. El valor de las casas ha disminuido en algunas zonas, y las hipotecas de las personas se están reajustando. Es decir, los intereses han subido. Y eso ha causado consternación, inquietud y preocupación. Muchas familias se enfrentan a la atemorizante probabilidad de una ejecución hipotecaria. Obviamente, una ejecución hipotecaria es una carga tremenda para una familia, y también lleva a pérdidas para prestamistas e inversionistas. Y eso afecta a nuestra economía entera.

A nivel de gobierno tenemos una función que desempeñar que es ayudar a los prestamistas y prestatarios para que trabajen juntos a fin de evitar la ejecución hipotecaria. Hay algunos propietarios de vivienda que tomaron decisiones responsables al comprar, que pueden conservar sus casas con sólo un poco de ayuda… un poco de información y un poco de ayuda. Y entonces, para ayudarlos, en octubre pasado, mi gobierno ayudó a reunir a un grupo del sector privado, que incluía a prestamistas, agencias de servicios hipotecarios, inversionistas, asesores hipotecarios, y que ahora se llama la Alianza HOPE NOW. Y los miembros de este grupo han hecho progresos. En primer lugar, han acordado implementar estándares en todo el sector para simplificar el proceso de refinanciamiento y modificación de ciertas hipotecas. HOPE NOW también dirige una línea nacional de ayuda para conectar a los propietarios de vivienda en apuros con asesores hipotecarios como la gente aquí en Novadebt.

También me reuní con algunos propietarios de vivienda que recibieron ayuda. Danny Cerchiaro nos acompaña, de Iselin, Nueva Jersey. Gracias por su presencia, Danny. Él es propietario de una vivienda que también sirve como local para su empresa de producción de películas. Danny y su esposa se enteraron el verano pasado de que los pagos de su hipoteca de interés reajustable iban a aumentar y le preocupaba la estabilidad financiera. Le preocupaba no poder conservar su casa. Necesitaba un local para su empresa y necesitaba un lugar donde dormir, y le preocupaba no poder pagar.

President George W. Bush delivers remarks on housing Friday, March 28, 2008, at Novadebt in Freehold, New Jersey. White House photo by Chris GreenbergConsiguió… llamó a HOPE NOW y empezó a trabajar con una asesora hipotecaria llamada Penny Meredith. Penny está aquí. Le agradezco que haya venido, Penny. Y menos de dos meses después, Penny ayudó a Danny a conseguir una hipoteca más económica de interés fijo. Danny llama a Penny —y son sus palabras— “la señora que hace magia”. Lo ayudó muchísimo.

Y hay muchos otros estadounidenses que pueden recibir el mismo tipo de ayuda. Una de las razones por las que he venido hoy es para decirle a la gente que está preocupada de no poder conservar su casa, que hay ayuda a su disposición.

Y también quiero darle las gracias a Theresa Torres, de Kansas City, quien nos acompaña. Ella realmente estaba preocupada. Es madre de tres niños, su esposo es subcontratista. Y estaba muy preocupada de no poder conservar su casa. Y la familia se retrasó en los pagos de su hipoteca en diciembre. Pero afortunadamente, supo llamar y, en este caso, pedir ayuda a Novadebt. La ayudaron a modificar su hipoteca. Y hoy, como resultado de la ayuda recibida, ya no está preocupada de perder su casa. Y creo que lo que dijo fue muy interesante, dijo: “Hoy veo que mi función es servir de ejemplo para gente en similar situación”. Así que Theresa, me complace su presencia.

Hay cientos de miles de propietarios de vivienda como Theresa y Danny que se pueden beneficiar si llaman a HOPE NOW. Y entonces, uno de mis propósitos es dejar en claro que hay un lugar donde obtener asesoría. Y quiero que mis conciudadanos, si están preocupados por su casa, llamen a este número: 188-995-HOPE [sic]. Permítanme repetir eso de nuevo: 188-995-HOPE [sic].

HOPE NOW puede ayudar a los propietarios de vivienda a encontrar la solución correcta. A propósito, queda más por hacer en Washington, y una de las cosas que podemos hacer es asegurarnos de que la Dirección Federal de Vivienda (Federal Housing Administration o FHA) reciba la reforma que necesita. Y hay un programa llamado FHASecure, que le ha dado a la FHA mayor flexibilidad para ofrecerles a los propietarios de vivienda en apuros, que aparte de eso tienen buen historial crediticio, la oportunidad de refinanciar. Este programa es muy útil. Es… hasta ahora, ha ayudado a 130,000 familias a refinanciar su hipoteca. Y para fines de año, calculamos que el programa habrá ayudado a 300,000 familias.

President George W. Bush shakes hands with troops following his event in Freehold, New Jersey Friday, March 28, 2008, at McGuire Air Force Base in New Jersey. White House photo by Chris GreenbergEs un buen comienzo. Queremos ayudar a la gente. Estamos comprometidos a ayudar a nuestros conciudadanos. Y comprendo plenamente, al igual que muchos estadounidenses, que los problemas del mercado inmobiliario son complicados y que no hay soluciones fáciles. Pero en las historias que escuché hoy, vi que los estadounidenses están respondiendo con compasión y determinación. Los vamos a apoyar con buenas medidas. Vamos a ayudar a los propietarios de vivienda responsables a sobrellevar este periodo difícil. Y al hacerlo, fortaleceremos el sueño de la casa propia.

Muchas gracias a todos.

Danny me acaba de decir que debo darles el número correcto: 1-888-995-HOPE.