Released by The White House - Office of the Press Secretary:
FACT SHEET: President Obama
Announces New Steps to Provide Housing Relief to Veterans and Service members
and Help More Responsible Homeowners Refinance
In his
State of the Union address, President Obama laid out a Blueprint
for an America Built to Last, calling for action to help responsible
borrowers and support a housing market recovery. While the government cannot
fix the housing market on its own, the President believes that responsible
homeowners should not have to sit and wait for the market to hit bottom to get
relief when there are measures at hand that can make a meaningful difference.
Today, the
President is announcing two steps the Administration is taking to support
homeowners and their families – providing relief for service members and
veterans, including those wrongfully foreclosed upon or denied a lower interest
rate on their mortgages, and reducing fees for FHA borrowers looking to
refinance. Along with the President's broader plan to help millions of
Americans refinance and save thousands of dollars a year, support the
communities hardest-hit by the housing crisis, and help families avoid
foreclosure and stay in their homes, this is part of the President's overall
strategy to support responsible homeowners and the housing recovery.
Providing
Relief for Service members and Veterans: On top of the historic settlement completed by the
Federal government and 49 state Attorneys General last month, major servicers
will be providing significant relief to thousands of service members and
veterans. Under the agreement, they will:
- conduct
a review of every servicemember foreclosed upon since 2006 and provide any who
were wrongly foreclosed upon with compensation equal to a minimum of lost
equity, plus interest and $116,785;
- refund
to service members money lost because they were wrongfully denied the
opportunity to reduce their mortgage payments through lower interest rates;
- provide
relief for service members who are forced to sell their homes for less than the
amount they owe on their mortgage due to a Permanent Change in Station;
- pay
$10 million dollars into the Veterans Affairs fund that guarantees loans on
favorable terms for veterans; and
- extend
certain foreclosure protections afforded under the Servicemember Civil Relief
Act to service members serving in harm's way.
Reducing
Fees for FHA Borrowers Seeking to Refinance: As part of the President's
aggressive effort to reduce barriers and costs for refinancing, the
Administration is also announcing that the FHA will cut its fees for
refinancing loans already insured by the FHA. An estimated 2-3 million
borrowers could be eligible for this savings, providing the typical FHA
borrower with the opportunity to save about a thousand dollars a year through
refinancing than they could have under today's fee structure.
Providing Relief to
Service members and Vets Hurt by Mortgage Abuses
Today, the
President is announcing relief that will be provided to thousands of
service members and veterans by servicers on top of the historic settlement
completed by the Federal government and 49 state Attorneys General last month.
This relief – which is in addition to the over $25 billion committed through
the overall settlement – includes:
- Compensating
Service members Wrongfully Foreclosed Upon: Servicers will conduct a review –
overseen by the Department of Justice's Civil Rights Division – of the files of
every servicemember foreclosed upon since 2006 to determine whether any were
foreclosed on in violation of the Service members Civil Relief Act (SCRA).
Servicers will compensate those who were with a payment equal to whichever of
the following sums is higher:
o the servicemember's lost equity,
plus interest, and an additional $116,785; or
o an amount provided for the same
violation as a result of a review conducted by the banking regulators.
- Compensating
Service members Wrongfully Charged Higher Interest Rates: Servicers will conduct a review – also overseen by
DOJ's Civil Rights Division – of the files of their servicemember clients
dating back to 2008 to determine whether they charged any an interest rate in
excess of 6% on their mortgage after a valid request to lower the rate, in
violation of the SCRA. Servicers will be required to provide any
servicemember who was wrongfully charged interest in excess of 6% with a
payment equal to at least four times the amount wrongfully charged.
o For example, if a servicemember who
took out a $200,000 mortgage with a 7% interest rate was wrongfully denied a
request to lower their interest rate to 6% over a course of 18 months, they
would receive a payment of over $9,000, plus interest.
- Providing
Relief for Service members Forced to Sell Their Home at a Loss Due to a
Permanent Change in Station: Under the Department of
Defense's Homeowners' Assistance Program (HAP), some service members who are
forced to sell their home at a loss due to a Permanent Change in Station (PCS)
may be compensated for the loss in their home's value. Under this
settlement, servicers will provide short sale agreements and deficiency waivers
to those service members who were forced to sell their home for less than they
owe on their mortgage due to a PCS, but who are not eligible for HAP. This
means that the benefits of that program will finally be extended to
service members who bought their homes between July 1, 2006 and December 31,
2008, or who received a PCS after October 1, 2010.
- $10
Million for the Veterans Housing Benefit Program. Under the settlement, servicers
will pay $10 million into the Veterans Housing Benefit Program Fund, through
which the Department of Veterans Affairs guarantees loans provided on favorable
terms to eligible veterans.
- Foreclosure
Protections for Service members Receiving Hostile Fire/Imminent Danger Pay. The SCRA prohibits servicers
from foreclosing on active duty service members without first securing a court
order, but only if their loan was secured when they were not on active duty.
The settlement extends this protection to all service members, regardless of
when their mortgage was secured, who within nine months of the foreclosure received
Hostile Fire/Imminent Danger Pay and were stationed away from their home.
For
Further Questions:
- Any
Servicemember who believes his or her rights were violated by Bank of America,
J.P. Morgan Chase, Ally, Citi, or Wells Fargo can contact the Justice Department
directly at 1-800-896-7743. The Department will have access to
information to determine whether or not service members are victims and the
settlement requires those individuals to be contacted.
- Service members
and their dependents who believe that their SCRA rights have been violated
should contact the nearest Armed Forces Legal Assistance
office. For the relevant contact information, please consult
the military legal assistance office locator at http://legalassistance.law.af.mil
and click on the Legal Services Locator.
- Additional
information about the Justice Department's enforcement of the SCRA and the
other laws protecting service members is available at www.servicemembers.gov.
Reducing Fees for FHA Borrowers Seeking to
Refinance – Saving Homeowners Hundreds of Dollars A Year
The FHA
offers a streamlined refinancing program to allow borrowers with FHA-backed
mortgages to refinance their loans at lower cost and with fewer burdens. This
program has helped hundreds of thousands of families refinance, but lender
reticence and fees have kept many families from participating. Today, the
President is announcing new steps to increase the reach and effectiveness of
the program, reducing the fees that participants will pay on these loans.
- Cutting
its Fees Substantially:
The FHA currently charges an up-front mortgage insurance premium of 1% of the
borrower's loan balance and an additional 1.15% of the balance per year. FHA is
reducing the up-front premium to .01% for streamlined refinancings of loans
originated prior to June 1, 2009 and cutting the annual fee for these
refinancings in half, to .55%. Together these reductions could save the typical
FHA borrower about a thousand dollars a year.
- An
Estimated 2-3 Million FHA Borrowers Will Be Eligible to Benefit: We estimate that approximately 2-3 million FHA
borrowers are eligible to benefit from the program with these changes. While it
is always difficult to estimate participation in these programs, this will
result in significant monthly savings for hundreds of thousands of families.
Reduction in Fees Could Save the
Typical Borrower About a Thousand Dollars a Year – On Top of Savings from
Refinancing
- Consider
a typical FHA borrower with $175,000 outstanding on their mortgage. Currently,
if this borrower refinanced into a 4% loan, they could reduce their monthly
payments to nearly $1,010 a month, including both the upfront and monthly
mortgage insurance premiums.
- With
lower mortgage insurance premiums, this borrower could reduce their total
monthly payments to about $915 per month. That means nearly $100 in additional
savings per month for an FHA borrower – on top of the savings they
would receive from refinancing to a lower interest rate.
- Fee
Reduction Builds on Earlier Efforts to Expand Access to FHA Refinancing by
Removing Refinancing Program from Lender Report Card: Earlier this year, the Administration announced
changes that will finally remove the reticence that many lenders have had to
provide refinancing to additional families. The FHA uses a calculation called
the "Compare Ratio" to assess lender performance and help determine whether
they can continue to do business with the FHA going forward. To date
streamlined refinances have been included in this calculation, and because many
of the loans refinanced through the program come from higher risk years,
lenders have been reluctant to offer the program to customers for fear that it
would impact their score and thus their relationship with FHA. The FHA has
now removed these loans from that analysis, thus removing this cause for
concern for lenders and opening this program up to many more families.
- Part
of the President's Broader Strategy to Help Families Refinance and Save: These steps are part of the
Administration's broader plan to provide access to responsible borrowers to
refinancing – allowing the typical homeowner to save thousands of dollars a
year. That includes:
o Providing Access to Refinancing for
Borrowers With Loans Guaranteed by Fannie Mae or Freddie Mac: Many GSE borrowers who are current on their payments
have nonetheless been unable to access refinancing, keeping them locked in high
interest rate mortgages in a market offering historically low rates. To
address one of the primary barriers to refinancing, a lack of adequate home
equity, the Administration created the Home Affordable Refinance Program (HARP).
This program has helped around a million GSE borrowers finally get access to
the refinancing market, lowering their payments by hundreds of dollars a month.
o Putting Forward a Plan to Further
Expand Access to Refinancing:
On Feb. 1,
the President announced a legislative plan to build on these changes to expand
access to refinancing for responsible borrowers. The plan would remove the
remaining barriers in the HARP program mentioned above, so that all
those with loans insured by Fannie or Freddie who have been paying their
mortgage on time will have access to simple, low-cost refinancing. It
would also create a similar program for those families whose loans do not
happen to be guaranteed by Fannie or Freddie. Together these steps would mean
that no responsible borrower is locked out of today's low interest rates just
because home prices in their neighborhood have fallen. This would provide
approximately 11 million families with loans insured by Fannie and Freddie and
3.5 million families with non-GSE loans with the opportunity to save thousands
of dollars a year.
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