“Amherst Securities Group issued a report suggesting that programs designed to support short sales could be the most effective loss mitigation approach, as they minimize loss severity. “In all cases, the loss severity on the short sale is 15-20% less than on the foreclosure sale,” Amherst researchers reported. Amherst researchers also said the Hope-for-Homeowners (H4H) program is a “powerful alternative” to the Home Affordable Modification Program (HAMP). Amherst researchers point to H4H’s ability to mimic the impact of short sales, such as a one-time loss on the loan, which provides a softer loss severity than foreclosure sales.
Borrowers completing the H4H program become re-equified and refinanced into a new Federal Housing Administration-insured mortgage, while HAMP provides capped incentives to servicers to modify mortgages in danger of foreclosure. The US Treasury Department then adjusts the HAMP incentive caps based on the level of actual participation. Plans for the “new and improved” H4H program could be released within the next two months, resolving enough issues to maximize the net present value of loans in bank portfolios but “unlikely” to be used for loans in private label securitizations, according to the report.” 2009 -11-09 Housingwire.com
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