It is amazing how the first programs developed in 2007 and 2008 to help people facing foreclosure stop the process and save their homes have failed. The Bush Administration launched two programs, the FHA Secure program and Hope For Homeowners. Neither was successful. Fannie Mae also started its own program. In February of 2008 Fannie Mae announced their HomeSaver Advance program. Their guidelines for this making home affordable were published that June. Fannie Mae called HomeSaver Advance as a preferred option to other loan modification programs. The objective was to give a person facing foreclosure a way to pay the money that they were behind on their loan and to start making their regular monthly payments again. Fannie Mae would arrange for the person to get an unsecured loan for the full amount that they owed.
President Obama’s making home affordable plan has outlined guidelines and regulations for lenders in regard to mortgage modification. In fact, until December 31st 2012, homeowners struggling to pay their monthly mortgage payments could be eligible to take part in the $75 billion Homeowner Stability Initiative.
Last, the person had to agree to repay the loan they got through HomeSaver Advance according to the terms outlined by Fannie Mae. The loan would come from their current mortgage company. The person could get a loan to cover the amount they owed. That would include what they were behind in principal and interest, taxes and insurance. If there were any escrow advances outstanding as well as foreclosure and bankruptcy fees, these could be included. Delinquent Homeowner Association dues also could be added in. The maximum available would be the lesser of 15% of the original amount of their loan or $15,000. That could be increased to $20,000 if the mortgage company bore the full risk of loss. This would be an unsecured loan for 15 years. The interest rate was 5%. For the first six months no payments would be required and no interest would be charged. Payment would start in the seventh month. The loan would be paid off over the remaining 174 months. There were no prepayment penalties. If the property was sold, any remaining balance had to be paid in full.
Loans under this HomeSaver Advance program became Fannie Mae’s main way of helping people facing foreclosure to get caught up on their mortgages and save their homes. In the third quarter of 2008 loans through HomeSaver Advance accounted for 45% of all loss mitigation activity in the United States. How successful was the program? Fannie Mae was taken over by the government in August of 2008. The Federal Housing Finance Agency (FHFA) has overseen it since then. In a report to congress in the middle of May of 2009, James Lockhart, the director of FHFA, indicated that a study was done of one group of people facing foreclosure who received loans through Homesaver Advance. Almost 70% of these had defaulted again on their mortgages and were facing foreclosure again.
These two options are essentially routes to doing the same thing – getting out from under your mortgage and making monthly payments again without fear that you won’t be able to keep your home. The point of any modification, whether through Wells Fargo or through the federal government with Wells’s help, is to avoid foreclosure and keep your home.
Learn more about Obama Mortgage Relief Plan Qualifications.