RealEstateEconomyWatch.com

A new refinancing program will help four to five million homeowners with less than 80 percent equity and who hold conforming loans owned or guaranteed by Fannie of Freddie allows them to refinance at current rates.

• A new refinancing program will help four to five million homeowners with less than 80 percent equity and who hold conforming loans owned or guaranteed by Fannie of Freddie allows them to refinance at current rates.

• A loan modification program allows borrowers who are underwater on their mortgages to modify their loans to at least a 31 percent debt-to-income ratio and reduce their monthly payments for at least five years.

• The program includes several incentives. Servicers will receive $1,000 for every eligible modification and monthly “pay for success” fees as long as the borrower stays current, up to three years. For modifying a mortgage while it is still current, lenders will receive $500 and mortgage holders $1,500. Borrowers who pay their loans on time will received $1,000 a year for up to five years. When modifications don’t work, lenders will receive incentives for selling short, auctioning or taking deeds in lieu of foreclosure.

• Lenders participating in the loan modification program would qualify for a new $10 billion insurance fund that will provide them an additional insurance payment on each modified loan linked to declines in the home prince index.

• Borrowers seeking to modify their loans and who also have high consumer debt equal to or more than 55 percent of their income will be required to enter a HUD-certified consumer debt counseling program.

• Only owner-occupied homes qualify. No home mortgages exceeding the Fannie/Freddie conforming limits will be eligible. No second homes for investment properties.

• Bankruptcy law would be changed to allow bankruptcy judges to reduce the mortgage debt of homeowners who file for bankruptcy.

• New funding from TARP will double the size of Treasury’s preferred stock purchase agreements through Fannie and Freddie from $100 billion to $200 billion (total increase of $200 billion) and increase the size of their retained mortgage portfolios by $50 billion.