March 12, 2010
Home Affordable Foreclosure Alternatives Program
Earlier this week the New York Times had a front-page story on the new Home Affordable Foreclosure Alternatives Program set to begin on April 5.
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
Other news outlets around the country have picked up the NYT story this week, although it's not entirely clear to me what the "news" is, since it seems the program was announced on Nov. 30, 2009. The Bankruptcy Prof Blog has an analysis here.
Anyway, according to the Times, the meat of the program seems to be this:
To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
One one hand, I'm glad to see some recognition that policies like HAMP focused primarily on keeping owners in their homes will not solve the crisis. But unless I'm missing something, count me skeptical that "spreading around" $3,500 will persuade a lot of lenders (and particulary second (or third) mortgagees) to come to the table, unless they're already inclined to. Does the plan have any mandatory provisions? This NAR page has a little more info with regards to some procedural items, but the Times story contains no mention of the actual program or who administers it, and I'm having trouble finding any sort of official government press release or website about HAFA. Let me know if you have better information.
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