The Streamlined Loan Modification Program (SLMP) is in effect.  The Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD), the Treasury Department, and the HOPE NOW Alliance representing the vast majority of mortgage lenders and mortgage are participating in the SLMP.  The SLMP applies not only to mortgages held or securitized by Fannie Mae and Freddie Mac but also to mortgages held by lenders in portfolio and mortgages in private label securities.  The program complements other individual lender initiatives to minimize foreclosures.

The goal of the SLMP is to reduce preventable foreclosures by establishing a streamlined loan modification program.  The SLMP sets an industry standard for helping borrowers at risk of losing their homes.  The program is aimed at borrowers at least 90 days delinquent who are at the highest risk of losing their homes.  The program is limited to borrowers who own and occupy homes as their primary residences and who are not in bankruptcy.

To apply, a borrower should contact the mortgage loan servicer, provide required information about the borrower’s income, submit a hardship statement, and certify the borrower did not purposely default to obtain a loan modification.  Under the program, an affordable mortgage is a mortgage where the payment does not exceed 38 percent of monthly gross income.  The lower payment can be achieved by reducing the interest rate, extending the term of the loan, deferring (but not forgiving) payment of principal, or a combination.  Where the servicer cannot make the loan affordable under the SLMP, it may address the problem on a case-by-case basis.  As an incentive to participate, servicers will receive $800 for each loan modified under the SLMP.

Borrowers with loans owned by Fannie Mae no longer have to be behind in payments in order to qualify for a loan modification.  Borrowers facing financial difficult, such as losing a source of income, now can apply for an “early workout” loan alteration.  Under Fannie Mae’s program, borrowers who qualify will enter into a trial period of reduced payments, usually for four months.  If the reduced payments are made on time each month during the trial period, the modified mortgage terms may become permanent.

As many as 53 percent of modified loans redefaulted within the first six months of the year, leading some critics to believe the initial modified loan payment was unaffordable for the majority of homeowners.  Prior to agreeing to a mortgage modification, homeowners should create a realistic budget to determine how much they can afford each month for a mortgage payment.  To help create a budget, consumers can visit the Internal Revenue Service’s website, www.irs.gov, and enter “collection financial standards” into the search box.  The search will direct consumers to pages offering guidelines of what they can reasonably expect to pay for food, clothing, housekeeping supplies, out-of-pocket health care, utilities and transportation.

The Federal Financial Regulators have issued a revised Identity Theft Brochure.  The federal bank, credit union, and thrift regulatory agencies new brochure – You Have the Power to Stop Identify Theft – is to assist consumers in preventing and resolving identity theft.  The updated brochure focuses primarily on Internet “phishing” by describing how phishing works, offering ways to protect against identify theft, and detailing steps to follow for victims of identity theft.  The brochure includes contact information for three major credit bureaus, where to report suspicious e-mails, and where to access additional information.  You can download the brochure from the websites of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, National Credit Union Administration, and Office of Thrift Supervision.

The Treasury Department’s plan to push down mortgage rates has led to increased optimism among many home buyers.  REALTORS®, and economists; however, some believe other factors such as job losses, lack of sufficient down payments, and less than favorable credit scores will continue to hamper the market.

Homebuilders are hoping the government institutes additional plans to increase the housing demand.  Two tactics homebuilders would like the government to consider include a $22,000 tax credit for home buyers and mortgage-rate buy downs that would reduce rates to as low as 2.99 percent.  According to the NATIONAL ASSOCIATION OF REALTORS® (NAR), each percentage-point reduction in interest could help sell between 500,000 and 800,000 homes.