The market has had some time to digest the specifics of the Obama Administration’s Homeowner Affordability and Stability Plan, and there is an emerging consensus that the current effort will help millions of borrowers left stranded by previous attempts. It’s far from perfect, but it can bring some significant relief, observers say.
Will the plan really “offer assistance to as many as 7 to 9 million homeowners” as the Treasury promises? “I expect those numbers are the full universe of borrowers who could benefit,” notes David Hamermesh, research director of consumer lending at TowerGroup. “Ever since the debacle with the Hope For Homeowners program, we’ve learned to be very skeptical of these estimates,” he continues. “That being said, I do expect this to be more successful and therefore approach the numbers. The best thing of all, of course, would be for this program to work in conjunction with others and accelerate the recovery so that fewer people need to take advantage of the new program.” He applauds the introduction of “some level of standard solutions.” This includes direction on modifications and “clearly laying out a present value test.” While the foreclosure plan does not include “explicit protection from lawsuits,” the Helping Families Save Their Homes Act (HR 1106) recently approved by the House of Representatives “does include safe harbor provisions to give servicers protection against some legal liabilities that may arise from losses that investors claim to suffer as a result of modifications,” Hamermesh adds. “This element of the proposed law would be a further step in the right direction to make lenders more willing to pursue modifications.”