Homeowner Affordability and Stability Plan Executive Summary
The deep contraction in the economy and in the housing market has created
devastating consequences for homeowners and communities throughout the country.
• Millions of responsible families who make their monthly payments and fulfill their
obligations have seen their property values fall, and are now unable to refinance at
lower mortgage rates.
• Millions of workers have lost their jobs or had their hours cut back, are now
struggling to stay current on their mortgage payments – with nearly 6 million
households facing possible foreclosure.
• Neighborhoods are struggling, as each foreclosed home reduces nearby property
values by as much as 9 percent.
The Homeowner Affordability and Stability Plan is part of the President’s broad,
comprehensive strategy to get the economy back on track. The plan will help up to 7 to
9 million families restructure or refinance their mortgages to avoid foreclosure. In doing
so, the plan not only helps responsible homeowners on the verge of defaulting, but
prevents neighborhoods and communities from being pulled over the edge too, as
defaults and foreclosures contribute to falling home values, failing local businesses,
and lost jobs. The key components of the Homeowner Affordability and Stability Plan
are:
The deep contraction in the economy and in the housing market has created
devastating consequences for homeowners and communities throughout the country.
• Millions of responsible families who make their monthly payments and fulfill their
obligations have seen their property values fall, and are now unable to refinance at
lower mortgage rates.
• Millions of workers have lost their jobs or had their hours cut back, are now
struggling to stay current on their mortgage payments – with nearly 6 million
households facing possible foreclosure.
• Neighborhoods are struggling, as each foreclosed home reduces nearby property
values by as much as 9 percent.
The Homeowner Affordability and Stability Plan is part of the President’s broad,
comprehensive strategy to get the economy back on track. The plan will help up to 7 to
9 million families restructure or refinance their mortgages to avoid foreclosure. In doing
so, the plan not only helps responsible homeowners on the verge of defaulting, but
prevents neighborhoods and communities from being pulled over the edge too, as
defaults and foreclosures contribute to falling home values, failing local businesses,
and lost jobs. The key components of the Homeowner Affordability and Stability Plan
are:
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1.Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From
Falling Home Prices
•Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at
historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing.
But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time
refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time
have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access
these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to
5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie
Mac to refinance through those two institutions.
•Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by
thousands of dollars per year:
oConsider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a
house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value
of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now
generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could
refinance to a rate near 5.16% – reducing their annual payments by over $2,300.
2.Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk
Homeowners
•Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of
responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet
cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their
mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime
and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to
make reasonable monthly mortgage payments to stay in their homes – providing families with security and
neighborhoods with stability.
•No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay
in their home – it will not aid speculators or house flippers.
•Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a
neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could
see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise
be absent the Homeowner Stability Initiative.
•Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they
are made before a borrower misses a payment, the plan will include households at risk of imminent default despite
being current on their mortgage payments.
•Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability
Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money
allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has
several key components:
��A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43
percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the
borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would
match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If
that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower
interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan
rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the
principal owed on the mortgage, with Treasury sharing in the costs.
��“Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible
modification meeting guidelines established under this initiative. They will also 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.
��Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on
time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal
balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000
each year for five years.
��Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay
current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of
$1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
��Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more
families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial
guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion –
will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that
home prices will fall even further later on. Holders of mortgages modified under the program would be provided with
an additional insurance payment on each modified loan, linked to declines in the home price index.
•Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for
loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s
pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all
financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement
loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for
loans that they own or guarantee, and the Administration will work with regulators and other federal and state
agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these
guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including
those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the
FDIC, Veterans’ Affairs and the Department of Agriculture.
•Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
��Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and
HUD to Monitor Performance
��Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
��Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2
Billion in Neighborhood Stabilization Funds
��Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk
Borrowers
3.Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:
•Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by
Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie
Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
oProvide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to
carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking
confidence in the mortgage market.
oTreasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level
of $100 billion each.
•Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae
and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
•Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to
provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the
GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with
corresponding increases in the allowable debt outstanding.
•Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to
support state housing finance agencies in serving homebuyers.
•No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the
Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency
Economic Stabilization Act/TARP.
All information from The White House Blog.
Questions and Answers
3 Examples of Plan
Falling Home Prices
•Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at
historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing.
But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time
refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time
have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access
these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to
5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie
Mac to refinance through those two institutions.
•Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by
thousands of dollars per year:
oConsider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a
house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value
of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now
generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could
refinance to a rate near 5.16% – reducing their annual payments by over $2,300.
2.Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk
Homeowners
•Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of
responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet
cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their
mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime
and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to
make reasonable monthly mortgage payments to stay in their homes – providing families with security and
neighborhoods with stability.
•No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay
in their home – it will not aid speculators or house flippers.
•Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a
neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could
see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise
be absent the Homeowner Stability Initiative.
•Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they
are made before a borrower misses a payment, the plan will include households at risk of imminent default despite
being current on their mortgage payments.
•Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability
Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money
allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has
several key components:
��A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43
percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the
borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would
match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If
that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower
interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan
rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the
principal owed on the mortgage, with Treasury sharing in the costs.
��“Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible
modification meeting guidelines established under this initiative. They will also 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.
��Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on
time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal
balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000
each year for five years.
��Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay
current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of
$1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
��Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more
families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial
guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion –
will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that
home prices will fall even further later on. Holders of mortgages modified under the program would be provided with
an additional insurance payment on each modified loan, linked to declines in the home price index.
•Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for
loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s
pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all
financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement
loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for
loans that they own or guarantee, and the Administration will work with regulators and other federal and state
agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these
guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including
those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the
FDIC, Veterans’ Affairs and the Department of Agriculture.
•Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
��Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and
HUD to Monitor Performance
��Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
��Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2
Billion in Neighborhood Stabilization Funds
��Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk
Borrowers
3.Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:
•Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by
Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie
Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
oProvide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to
carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking
confidence in the mortgage market.
oTreasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level
of $100 billion each.
•Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae
and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
•Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to
provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the
GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with
corresponding increases in the allowable debt outstanding.
•Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to
support state housing finance agencies in serving homebuyers.
•No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the
Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency
Economic Stabilization Act/TARP.
All information from The White House Blog.
Questions and Answers
3 Examples of Plan
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