Nevada has been hit hard by our nation’s housing crisis, so I am acutely aware of the havoc the foreclosures wreak not only on individual homeowners, but on entire communities and local governments. Stemming the tide of foreclosures is key to our nation’s economic recovery.  This crisis requires a comprehensive approach that provides solutions for as many homeowners as possible and incentives to ensure that lenders work to stabilize the housing market one home at a time.

For information on foreclosure prevention please click here.

Making Home Affordable

The Obama Administration established the Making Home Affordable program to help provide viable refinancing options for responsible homeowners, loan modifications for distressed homeowners, and incentives to ensure that lenders work to stabilize the housing market one home at a time.

Mortgage Refinancing:

Millions of responsible homeowners are unable to take advantage of historically low mortgage rates because they have lost value in their homes as a result of the downturn in the housing market. The Making Home Affordable program will help those homeowners that took out conforming loans owned or guaranteed by Fannie Mae and Freddie Mac to refinance into more affordable rates.

Loan Modifications:

Millions more struggle to stay current on their mortgage payments in the face of depleted household income. The Administration has proposed a comprehensive strategy to establish loan modifications that create a shared effort between the government and the lender to reduce the borrower’s monthly mortgage payment to as low as 31 percent and no more than 38 percent of income.  This program requires institutions that receive government assistance to follow clear guidelines for preventable foreclosures and will help at-risk homeowners by implementing the following measures:

• Providing “Pay for Success” incentives for servicers to perform loan modifications, including an up-front fee of $1,000 for each eligible modification and additional fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years;
• Providing incentives for borrowers to receive a monthly balance reduction payment as long as they stay current on the loan, up to $1,000 per year for five years; and
• Encouraging servicers to reach borrowers early with incentive payments of $500 to servicers and $1,500 to mortgage holders if they modify loans before at-risk borrowers fall behind in payments.

Additionally, the Administration recently improved the Hope for Homeowners (H4H) program, another mortgage-modification program that especially helps homeowners facing negative equity in their mortgage, a problem that unfortunately too many Nevadans face.  This program allows homeowners to be placed in a fixed-rate, federally guaranteed mortgage in return for the mortgage holder agreeing to reduce the principal owed on the mortgage to a level below the current value of the home. 

Short Sales:

Most recently, the Administration expanded the Making Home Affordable program to help incentivize short sales.  For many Nevadan homeowners trapped in a mortgage with negative-equity, a short sale is often a practical and economical solution.  This new initiative will encourage lenders to pursue this avenue by:

• Offering mortgage servicers up to $1,000 and borrowers up to $1,500 to successfully complete a short sale transaction; and
• Provide up to $1,000 to offset the costs associated with enticing second mortgage holders to relinquish liens that would prevent a short sale.

The Making Home Affordable program will also strengthen confidence in Fannie Mae and Freddie Mac by increasing the Treasury Departments funding commitment to these institutions. This will help stabilize the housing market and keep mortgage rates low. The Administration will also work with Fannie and Freddie to support state housing finance agencies serving homebuyers. This initiative will help millions of families maintain the American Dream of homeownership.

For information and resources about programs to help make your mortgage affordable, please go to http://makinghomeaffordable.gov/.

Helping Families Save Their Homes Act

The Helping Families Save Their Homes Act, which has been signed into law, includes several provisions to prevent foreclosures, protect tenants and combat mortgage scams.  This law:

• Protects loan servicers from lawsuits, many of whom won’t modify mortgages fearing they will be sued by investors.
• Expands the H4H program by lowering fees for homeowners and lenders alike, and giving lenders greater incentives to participate.  This program helps modify loans with the goal of lowering monthly mortgage payments.
• Provides resources to HUD to combat mortgage fraud, including additional staff and advertising to warn consumers about scams and inform them of legitimate foreclosure-relief services.
• Provides up to $5 million a year for two years, and directs HUD to advertise in languages that will raise awareness more broadly in communities across the nation. This will help prevent fraud and provide homeowners with information on how and where to get government-approved assistance.
• Includes new protections for tenants of foreclosed homes.

Fraud Enforcement and Recovery Act

Mortgage fraud is one of the biggest factors of the current economic crisis.  Unfortunately, as the government increased efforts to help families losing their homes, the prevalence of fraud rose simultaneously.  There are many companies claiming to be government-approved and charging for services that should be free.  Further, these companies are also continuing to offer consumers extremely risky loans or tricking them out of their homes.  In 2001, 6,400 cases of fraud were reported across the country. In 2008, the number of fraud cases almost quadrupled to 63,173 cases. (FBI and Democratic Policy Committee).  To resolve this problem, I help lead the Senate to pass the Fraud Enforcement and Recovery Act of 2009 which has been signed into law.  This law:

• Provides critical funding and new tools that will allow law enforcement agencies, such as the FBI and HUD, to prosecute and punish those responsible for the mortgage fraud and corporate schemes that have hurt countless hardworking Americans and led to the worst financial crisis in decades.
• Increases the amount of resources at the U.S. Department of Justice to take fraud cases to trial.
• Applies government regulations to all companies that sell mortgages.  Previously, the federal government could only regulate banks.
• Closes several legal loopholes that otherwise may allow individuals guilty of criminal conduct to evade prosecution.  Individuals who have engaged in corruption or deliberate criminal behavior should not be able to escape punishment on a technicality.
• Provides the Federal Trade Commission (FTC) funding to investigate subprime loans. The latest FTC investigations have resulted in charges against a California company allegedly charging Hispanic and African American clients higher interest rates than White clients, even though they had the same qualifications [FTC].

If you think you are a victim of mortgage fraud please contact the Nevada Attorney General’s Bureau of Consumer Protection at in Las Vegas 702. 486.3194or 775.684.1180 in Carson City.  A complaint form, as well as other valuable information on consumer protection is also available on the Attorney General’s web site at www.ag.state.nv.us.

Frequently Asked Questions

Borrowers Who Are Current on Their Mortgage:

Eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan.   Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.  To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender.

Do homeowners qualify to refinance if they owe more than the property is worth?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) 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 you may qualify.  The current value of your property will be determined after you apply to refinance.

Do homeowners still qualify to refinance if they have both a first and second mortgage?

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 to refinance under the Making Home Affordable program.  Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.  

Will refinancing lower monthly payments?

The objective of the Making Home Affordable Program is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan.  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.

What are the interest rate and other terms of this refinance offer?

The objective of the Making Home Affordable program is to provide borrowers with a safe loan program with a fixed, affordable payment.  All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate.  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 notes.  

Will refinancing reduce the amount owed on the loan?

No.  The objective of the Making Home Affordable program is to help borrowers refinance into safer, more affordable fixed rate loans.  Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe.  However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

What should homeowners do to apply?

You should gather the information that you will need to apply and contact your lender.  This includes:

• information about the gross monthly income of all borrowers,  including your most 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
• payments on each of your credit cards if you are carrying balances from month to month, and
• payments on other loans such as student loans and car loans.

Borrowers Who Are at Risk of Foreclosure:

The Making Home Affordable program offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current.  By providing mortgage lenders 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.

Do homeowners need to be behind on their mortgage payments to be eligible for a modification?  

No.  Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default.  This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.    

How do homeowners know if they qualify for a payment reduction?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.

If a homeowner does not live in the house that secures the mortgage they’d like to modify, is this mortgage eligible for the Making Home Affordable program?

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 first mortgage on your primary residence is eligible.  Mortgages on 2, 3 and 4 unit properties are also eligible as long as you live in one unit as your primary residence.

If homeowners owe more than their house is worth, will the Making Home Affordable program reduce what they 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.  Lenders are likely to lower payments mainly by reducing loan interest rates.  However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

Are lenders required to modify loans?

No.  Servicers will 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.  To encourage borrowers who work hard to retain homeownership, the Making Home Affordable program provides incentive payments as a borrower makes timely payments on the modified loan.   The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt.  Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

What are the costs associated with a loan modification?

There is no cost to borrowers for a modification under the Making Home Affordable program.  

Can homeowners that are working with their lender /housing counselor on a loan workout still be considered for the Making Home Affordable program?

Ask your lender or counselor to be considered under the Making Home Affordable program.

How do homeowners apply for a modification under the Making Home Affordable program?

You may not need to do anything at this time.  Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria.  They will send letters to potentially eligible homeowners, a process that may take several weeks.   If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor.  Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

What should homeowners do if their home is already scheduled to be foreclosed?

Contact your mortgage servicer or credit counselor.  Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility.