Principal reductions, this is the way, Treasury says
According to the latest Supplemental Directive the Treasury increases incentives for second lien investors when loans receive principal reductions.
The new incentives apply to permanent HAMP modifications with principal reductions through the government’s PRA (Principal Reduction Alternative) which start their trial period March 1 or later.
The incentives are also available when second liens are completely or partially eliminated through the Second Lien Modification Program (2MP) on loans modified starting June 1, DsNews informs.
According to information supplied by the online newspaper the Treasury targets loans no more than six month delinquent over the previous 12 months. Its proposal looks like this: investors may receive $0.63 per dollar of written down principal between 105% and 115% market-to-market loan-to-value ratios (MTMLTVs) or $0.45 per dollar of written down principal between 115% and 140% MTMLTVs.
“For loans that have been more than six months delinquent sometime in the previous 12 months, investors may receive $0.18 per dollar of written down principal, irrespective of MTMLTV ratio.”
Furthermore, investors can receive $0.12 per dollar of unpaid principal balance eliminated on second liens if the second lien modified through 2MP have not been more than a half a year delinquent in the previous 12 months.
“This guidance does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, insured or guaranteed by the Veterans Administration or the Department of Agriculture’s Rural Housing Service or insured by the Federal Housing Administration,” the directive states.
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