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As the Obama Administration announced the details of its Home Affordable Modification Program (“HAMP”) in March and April, 2009, one crucial element remained missing: a “safe harbor” for loan modifications made under HAMP. That safe harbor was provided by the Helping Families Save Their Homes Act of 2009 (the “Act”), which was enacted by Congress on May 19, 2009, and signed into law by President Obama the following day.

The Obama Administration’s Homeowner Affordability and Stability Plan (“HASP”) has added a second lien modification program (the “Second Lien Program”) to the Home Affordable Modification Program (“HAMP”). HASP is a part of the Administration’s comprehensive Financial Stability Plan, designed to stabilize the U.S. housing market, which also includes the Public-Private Investment Program (“PPIP”). Residential mortgage loan servicers who want to participate in the PPIP must also participate in the new Second Lien Program, in addition to HAMP and the Hope for Homeowners (“H4H”) refinancing program.

The Home Affordable Modification Program (“HAMP”) was created as part of the Administration’s  Financial Stability Plan, announced on February 10, 2009. The initial details of HAMP were released on March 4, 2009. See here and here regarding these developments.

Fannie Mae and Freddie Mac have issued guidelines on how the loan modification program works for loans owned, securitized or guaranteed by them, and links to these guidelines can be found here and here. The IRS clarified some of the tax questions that were raised, as we described in our recent client alert, here. What remained were questions about how this program would apply to loans in securitizations sponsored by entities other than Fannie Mae and Freddie Mac.

On April 10, 2009, the Internal Revenue Service (“IRS”) issued Notice 2009-36 (the “Notice”) and Revenue Procedure 2009-23 (the “Revenue Procedure”) to provide guidance regarding the impact of loan modifications made pursuant to the Obama administration’s recently announced Home Affordable Modification Program (“HAMP”). The HAMP contains several incentives to encourage modifications, including payments to servicers, borrowers and lenders/investors, which would include securitization vehicles. The Notice and the Revenue Procedure provide issuers and servicers greater flexibility to implement loan modifications pursuant to the HAMP.

The Obama Administration’s Financial Stability Plan, announced on February 10, 2009, promised to address the foreclosure crisis with a comprehensive plan to stem foreclosures and restructure troubled mortgage loans. That plan, announced on February 18 as the Homeowner Affordability and Stability Plan or “HASP,” included access to low-cost refinancing for qualifying borrowers with conforming loans owned or guaranteed by Fannie Mae and Freddie Mac and a $75 billion homeowner stability initiative to prevent foreclosures. The details of the homeowner stability initiative, which would include a plan to encourage servicers to modify loans of homeowners who are delinquent on their loans or who are in danger of becoming delinquent, were to be released in early March.