The Association of Mortgage Investors, which represents institutional investors and asset managers that hold mortgage securities, has thrown its support behind the program announced by the Obama administration to provide a path for reduced principal through a refinancing program for homeowners who are underwater on their mortgage.
‘Investors have long felt that the only way to provide homeowners long-term relief is to address the problem of both affordability and negative equity,’ says Micah Green, an attorney with Patton Boggs LLP who represents the Association of Mortgage Investors. "This is not only important for the homeowner, but is also critical to the housing market and the economy as a whole.
Last Friday, the administration announced a broad collection of new programs intended to help curb the number of new foreclosures. The initiatives range from a forbearance plan for unemployed borrowers, to new incentives that encourage principal reductions, to a new Federal Housing Administration (FHA) refinance option, for which lender participation is voluntary.
"Importantly, there are many details that need to be finalized and clarified from today's announcement, including how second liens are treated, to ensure that the homeowner's total debt burden is not excessive," Green says, adding that officials from the Treasury and the Department of Housing and Urban Development must work with both the servicer and investor community to ensure that any implementation issues are resolved quickly.
First- and second-lien investors must be committed to sharing the burden of providing principal reduction in order for troubled homeowners to achieve sustainable relief that will be provided by a properly sized refinanced FHA mortgage, Green says.
"This program should also respect the priority of liens. Therefore, principal reductions of senior and junior liens should be carried out accordingly," he says.
SOURCE: Patton Boggs
