EPARTMENT OF THE TREASURY
March 4, 2009
Making Home Affordable
Summary of Guidelines
Making Home Affordable
will offer assistance to as many as 7 to 9 million homeowners, making their
The Home Affordable Refinance
solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these
borrowers would be unable to refinance because their homes have lost value, pushing their current loanto-
value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be
eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an
adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.
GSE lenders and servicers already have much of the borrower’s information on file, so documentation
requirements are not likely to be burdensome
The Home Affordable Refinance program ends in June 2010.
foreclosure by reducing monthly mortgage payments. Working with the banking and credit union
regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury
Department today announced program guidelines that are expected to become standard industry practice
in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with
an expanded and improved Hope for Homeowners program.
With the information now available,
program will be available to 4 to 5 million homeowners who have a. In addition, in some cases an appraisal will not be. This flexibility will make the refinance quicker and less costly for both borrowers and lenders.Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoidservicers can begin immediately to modify eligible mortgages
under the Modification program so that
detailed guidelines (separate document) provide information on the following:
Eligibility and Verification
at-risk borrowers can better afford their payments. The
Loans originated on or before January 1, 2009.
Higher limits allowed for owner-occupied properties with 2-4 units.
First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750.
stubs, and most recent tax return, and must sign an affidavit of financial hardship.
All borrowers must fully document income, including signed IRS 4506-T, two most recent pay
documentation; no investor-owned, vacant, or condemned properties.
Property owner occupancy status will be verified through borrower credit report and other
when the servicer determines that the borrower is at imminent risk of default.
Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments
under the program.
Loan Modification Terms and Procedures
Modifications can start from now until December 31, 2012; loans can be modified only once
unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain
waivers of limits on participation.
Participating servicers are required to service all eligible loans under the rules of the program
that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the
net present value of cash flows with modification and without modification. If the test is positive
– meaning that the net present value of expected cash flow is greater in the modification scenario
– the servicer must modify absent fraud or a contract prohibition.
Participating loan servicers will be required to use a net present value (NPV) test on each loan
property valuation methodologies, home price appreciation assumptions, foreclosure costs and
timelines, and borrower cure and redefault rate assumptions.
Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates,
more than 31% of gross monthly income (DTI).
Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no
then if necessary extending the term or amortization of the loan up to a maximum of 40 years,
and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners
refinancing are acceptable alternatives.
The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%),
association and/or condominium fees. Monthly income includes wages, salary, overtime, fees,
commissions, tips, social security, pensions, and all other income.
The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s
before December 31, 2009.
Payments to Servicers, Lenders, and Responsible Borrowers
Servicers must enter into the program agreements with Treasury's financial agent on or
38% DTI to 31% DTI.
The program will share with the lender/investor the cost of reductions in monthly payments from
each modification, plus "pay for success" fees on still-performing loans of $1,000 per year.
Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for
reduction payments each year for up to five years.
Homeowners who make their payments on time are eligible for up to $1,000 of principal
$500 to servicers for modifications made while a borrower is still current on mortgage payments.
The program will provide one-time bonus incentive payments of $1,500 to lender/investors and
The program will include incentives for extinguishing second liens on loans modified under this
and until the servicer has first entered into the program agreements with Treasury’s financial
No payments will be made under the program to the lender/investor, servicer, or borrower unless
Transparency and Accountability
Similar incentives will be paid for Hope for Homeowner refinances.
central to the program.
Measures to prevent and detect fraud, such as documentation and audit requirements, will be
compliance review, including borrower eligibility, underwriting, incentive payments, property
verification, and other documentation.
Servicers will be required to collect, maintain and transmit records for verification and
Freddie Mac will audit compliance.
mortgages more affordable and helping to prevent the destructive impact of foreclosures on families,
communities and the national economy.