Treasury to Pay Servicers Who Use FHA Refi Program

To jumpstart the Hope for Homeowners program, the Treasury Department will pay servicers hefty bonuses to use the FHA refinancing program and purchase Ginnie Mae securities backed by H4H loans. "These purchases will increase secondary market liquidity for new Hope for Homeowners loans, supporting additional assistance to homeowners," Treasury says in an update to the Obama administration's loan modification program. Participating servicers are expected to evaluate homeowners that are going through a trial loan modification to see if they can qualify for a principal writedown under the Federal Housing Administration H4H program. If the investor agrees to a writedown, the servicer would receive a $2,500 up-front incentive payment for a successful H4H refinancing, instead of the $1,000 that is paid for a standard loan modification. In addition, "lenders who originate the new H4H loan are eligible for success fees of up to $1,000 per year for up to three years, so long as the refinanced loan remains current," Treasury says.