President revamps Hope for Homeowners

Thursday, May 21, 2009

President Obama signed a bill into law May 20, 2009 that improves elements of the Hope for Homeowners' mortgage modification program. The new law increases the likelihood that both homeowners' and lenders will participate in the program because participation fees have been reduced and financial incentives have been added. Homeowners who are at "imminent risk" of defaulting, not only those in default, will be eligible for loan modification.

Primary and secondary lenders that modify a mortgage under this plan will have an opportunity to earn back greater sums of money when the borrower sells the home. Loan servicers will also benefit by being protected from liability when offering approved loan modifications to homeowners. The Department of Housing and Urban Development (HUD) will be responsible for running the Hope for Homeowners' program.

The Helping Families Save Their Homes Act (S.896) also extends FDIC deposit insurance coverage for up to $250,000 though 2013. National Credit Union Adminstration (NCUA) funds will also be covered up to $250,000 for the next four years. The bill allots $50 million dollars a year for housing counseling efforts in regions with the highest foreclosure rates.

Tenants will now be allowed to remain their homes through the life of the the lease, even if the home has been foreclosed on. An exception is made if the home is sold and the buyer will live in the home. In that case, tenants must receive at least 90 days notice.