GSEs Issue Guidance on Home Affordable Modification Program

On March 11, 2009, Freddie Mac issued Bulletin 2009-6 giving its servicers guidance on the Home Affordable Modification Program, one of the programs under the Obama Administration's Making Home Affordable initiatives. On March 4, 2009, Fannie Mae released guidance on its version of the program as Announcement 09-05, Introduction of the Home Affordable Modification Program, HomeSaver ForbearanceTM, and New Workout Hierarchy.  Details of the programs differ, but they share the same major requirements and goals. The goal of the programs is to help troubled borrowers who face hardship and have defaulted or are at imminent risk of default, as well as to help stabilize communities. The programs reduce mortgage payments for homeowner-occupants as low as 31 percent of the borrower's gross monthly income, provide for a trial period during which the borrower must make three monthly payments before the modification becomes permanent, and include incentives for servicers and borrowers to participate and succeed. Mortgages with balances up to $729,750 are eligible (higher maximums for 2-, 3-, and 4-unit properties).  The Freddie Bulletin reconfirms its policy directing servicers to suspend foreclosures where the borrower may be eligible for a loan modification until the servicer determines whether the borrower is eligible for this or any other Freddie Mac workout program. The Fannie Announcement establishes a new HomeSaverTM Forbearance Program for borrowers who do not qualify for the Home Affordable Mortgage Program but are willing and able to make monthly payments of at least half of the monthly payment amount due. Servicers are instructed to work with borrowers during the 6 month forbearance period to identify a permanent foreclosure prevention alternative.

HUD Warns Housing Counseling Agencies Not Take a Fee Split from Real Estate Brokers/Agents

A real estate trade publication recently reported that HUD's Office of Single Family Housing has warned housing counseling agencies that it is not permissible to take a fee split from real estate brokers or agents to defray the cost of counseling and that fee splits may violate the Real Estate Settlement Procedures Act (RESPA). All HUD-approved housing counseling agencies, their affiliates, and branches were ordered to stop the practice immediately. The warning came in response to reports that some housing counseling agencies were receiving a share of real estate broker or agent commissions on short sales to pay for clients' foreclosure counseling sessions

HUD Reopening Comment on Required Use Provisions of New RESPA Rule

On Friday, HUD announced (http://www.hud.gov/news/release.cfm?content=pr09-020.cfm) it will reopen public comment on how it should define "required use" for purposes of Section 8 of the Real Estate Settlement Procedures Act.

The "required use" provisions in HUD's November 16, 2008 RESPA rule would particularly affect builders' incentives for use of affiliated lenders and were the subject of litigation by the National Association of Home Builders. HUD said it said it will delay its implementation of the provisions for 90 days, or until July 16th, as it solicits public comment on whether to withdraw its new definition. HUD did not indicate that it would withdraw the entire RESPA rule to coordinate it with the forthcoming Truth in Lending Act revisions as HUD and several other trade associations recently requested by letter to Secretary Shaun Donovan.