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Making Home Affordable Presentation for the National League of Cities

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Making Home Affordable Overview

• MHA is a key part of the Administration's comprehensive strategy to stabilize the nation’s housing market and prevent avoidable foreclosures.• The Home Affordable Modification Program

(HAMP), has provided sustainable modifications for over 600,000 borrowers.• By setting affordability standards, HAMP has

changed the way mortgage servicing provides assistance to struggling borrowers.

MHA is part of the comprehensive approach to promoting stability for the housing market, and homeowners.

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MHA Programs Offer Help

• HAMP modifications lower mortgage payments, creating more affordable homeownership for struggling homeowners.• MHA and related programs are also designed to

provide relief to those who are unemployed; those who owe more than their homes are worth; and those with second liens causing a strain on affordability.• MHA offers a range of programs that can help

homeowners; from taking advantage of today’s historically-low interest rates to exiting gracefully when homeownership is no longer affordable or desirable.

MHA and related programs work together to prevent avoidable foreclosures.

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Changed Servicer practices with respect to foreclosure prevention.

HAMP Requirements

• Modification at top of waterfall before repayment plans or other options• Defined requirements for borrower outreach and

limitations on dual-tracking• Standard process for modification evaluation

• Fixed Debt-to-Income (DTI)• Verified ability to repay• Trial period• Net Present Value (NPV) test

• Incorporated 2nd liens and principal reduction

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Relief for Struggling Homeowners

Over 600,000 homeowners have permanently modified their mortgage under HAMP, with a median savings of over $500 every month.

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Homeowners in permanent modifications realize real savings.

Loan Characteristic Before Modification

After Modification

Median Decrease

Median Monthly Housing Payment3 $1,435.77 $836.42 ‐$527.10

Front-End Debt-to-Income Ratio1 45.3% 31.0% ‐14.3 pct pts

Back-End Debt-to-Income Ratio2 79.5% 62.8% ‐14.8 pct pts

Source: MHA Program Servicer Performance ReportThrough January 2011

Sustainable Affordability for Homeowners

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HAMP Modifications Performing Well

HAMP permanent modifications are outperforming industry norms.

Source: OCC and OTS Mortgage Metrics ReportThird Quarter 2010

Table 32. Performance of HAMP ModificationsCompared with Other Modifications*

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Reaching Distressed HomeownersMost MHA participants are:• Moderate and middle income• Financially-distressed• “Underwater" on their mortgages

Borrowers in permanent HAMP modifications have:• Median annual income of approximately $46,000• Median credit score of 570 at entering trial period• Post-modification loan balance just over $232,000• Median LTV of 118%

Of borrowers reporting race and ethnicity:• African-Americans 18%• Hispanics 26%

MHA is providing assistance to moderate and middle income homeowners.

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HAMP catalyzed the mortgage servicing industry in providing more sustainable solutions to struggling homeowners. • In the 1st quarter of 2009, nearly half of

modifications increased borrowers’ monthly payments or left them unchanged. • By the 3rd quarter of 2010, close to 90% of

modifications lowered payments for borrowers. • OCC reports servicers are generally following

HAMP protocol for non-HAMP modifications resulting in average savings for borrowers of $332 per month.

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HAMP has changed the way the mortgage servicing industry works.

HAMP Has Helped Catalyze Mortgage Servicing

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• Second Lien Modification Program (2MP), designed to facilitate the modification of second liens simultaneously with the first, becoming fully operational.• 17 servicers, including the 4 largest, participating

and covering over 60% of second liens.• Principal Reduction Alternative (PRA) provides

incentives to reduce principal on loans greater than 115% loan-to-value (LTV).• NPV model became effective Oct. 1, 2010.

• Hardest Hit Fund: $7.6 billion to 18 states and DC HFAs for innovative programs around unemployment and negative equity.

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MHA and related programs offer a comprehensive range of options for struggling homeowners.

Developments

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Questions

Thank You

March 2011 l Making Home Affordable