Home Affordable Modification Program Guidelines

Well, whether you like it or not, as a US Citizen you are now in the mortgage business. Today the Government announced it's Home Affordable Modification Program Guidelines. In essense, this program is "suppose" to help to stabilize the housing market and curb foreclosures. But here are the details and what it entails.
(click here to see full guidelines)

Summary of Guidelines

• For Loans originated on or before January 1, 2009.

• Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

• Owner Occupied, First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750.

• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.

• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).

• The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

• The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.

• Servicers will be paid $1,000 up front and up to $1,000 per year for performing loans.

• Homeowner’s who make their payments may qualify for a $1,000 principle reduction for each of the first 5 years.

• The program will include incentives for extinguishing second liens on loans modified under this program.

My feeling is that as a nation we are just holding on longer and longer to the roote problem which is that for quite some time consumers have become accustomed to getting what they want right now and inexpensively at that. Our nation's economy has been fueled by easy financing options and now the government is enforcing policy that we will all be paying for and will more-than-likely only delay further softening in the housing markets. Please post comments below.