National Closing Center

Posts Tagged ‘Treasury department’

The Treasury Department has announced it’s second major revision of the Home Affordable Foreclosure Alternatives Program (HAFA)  since it was launched in 2009. A new directive from the Treasury Department lifts a cap that had restricted loan servicers to paying second-lien holders no more than 6 percent of outstanding loan balance in exchange for releasing subordinate liens.

Initially, the cap on payoffs to second-lien holders was 3 percent, with an aggregate total of no more than $3,000. The cap was increased to 6 percent with an overall limit of $6,000 in March 2010.

The $6,000 overall limit remains in place, but eliminating the 6 percent cap gives loan servicers more freedom in dealing with second-lien holders when borrowers owe less than $100,000. Second-lien holders — typically lenders or investors who funded “piggyback” loans — have been a major obstacle to short sales.

When loan servicers hire contractors to help the listing broker, any associated vendor fees cannot be charged to the homeowner or deducted from the real estate commission.

The Dec. 28 directive takes effect Feb. 1 but loan servicers are free to implement it sooner.

According to National Public Radio, more homeowners are dropping out of the Obama administration’s main foreclosure-relief program, which has been widely criticized for failing to help more people keep their homes.

The Treasury department said Wednesday that about 774,000 homeowners have dropped out as of last month. That’s about 54 percent of the more than 1.4 million people who applied. And it’s up from October, when approximately 756,000 had fallen out.

The program is intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. The program has struggled to convert them into permanent loan modifications.

Another 505,000 homeowners have secured lower payments permanently. That’s about 35 percent of the number who enrolled on a trial basis, up slightly from October’s reading.