{
  "id": "RL34372",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL34372",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 364655,
      "date": "2008-06-18",
      "retrieved": "2016-04-07T03:21:24.146105",
      "title": "The HOPE NOW Alliance/American Securitization Forum (ASF) Plan to Freeze Certain Mortgage Interest Rates",
      "summary": "In response to the downturn in the U.S. mortgage market, the Bush Administration helped broker an alliance of mortgage lenders, servicers, counselors, and investors called the HOPE NOW Alliance, whose stated goals are to \u201cmaximize outreach efforts to homeowners in distress to help them stay in their homes\u201d and to \u201ccreate a unified, coordinated plan to reach and help as many homeowners as possible.\u201d One aspect of the alliance is the Statement of Principles, Recommendations and Guidelines for a Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans (the Framework or ASF Plan), as proposed by the American Securitization Forum (ASF).\nPursuant to the Framework, borrowers who meet certain requirements qualify for \u201cfast track\u201d loan modification, which may include an interest rate freeze at the rate prior to reset that, in most cases, lasts for five years. Because this type of modification is a deviation from the norm, servicers willing to perform loan workouts in accordance with the Framework\u2019s guidelines could worry that they would open themselves up to tax, accounting, and contract liability from secondary market investors and federal regulators of tax-exempt trusts. This potential liability could deter servicers from engaging in loss mitigation, even those measures outlined in the Framework.\nThe Internal Revenue Service (IRS) issued a revenue procedure (Rev. Proc 2008-28) on May 16, 2008, to clarify certain tax issues relating to modification of securitized mortgage loans. The IRS said that it would not challenge the tax status of the trusts that hold securitized loans, nor would the IRS assert that anticipatory loan modifications create a tax liability on prohibited transactions, if: (1) the mortgage is for a single-family (one- to four-unit) dwelling; (2) the dwelling is owner-occupied; (3) overdue mortgages make up less than 10% of the trust\u2019s assets at start-up; (4) there is reasonable belief that the original loan will result in foreclosure; (5) the loan modification is less favorable to the holder of the loan than the original loan; and (6) there is reasonable belief that the loan modification reduces the risk of foreclosure.\nThe data show that loan modifications and formal repayment plans have been increasing steadily in each successive quarter since the issuance of the Framework. However, it is difficult to identify which of these modifications were made pursuant to the ASF Plan and which occurred through alternative channels. The Framework only applies to certain mortgages that are current, which makes it distinct from Project Lifeline, a plan announced on February 12, 2008, for mortgages that are in serious default.\nOn June 17, 2008, the HOPE NOW servicers announced common measures to expedite resolution of short sales and second mortgages, which can require third-party approval.",
      "type": "CRS Report",
      "typeId": "REPORTS",
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}