SOURCE: RH Reward

RH Reward

May 14, 2010 09:30 ET

RH Reward Comparison: What Are Your Options on an Underwater Mortgage?

RUMSON, NJ--(Marketwire - May 14, 2010) -  With concerns rising among many homeowners on the impact of falling home prices on their personal balance sheets, RHReward.com receives inquiries from consumers on the options available to deal with underwater mortgages.

The Responsible Homeowner Reward ("RH Reward") program, available through participating lenders by Loan Value Group, has offered over $86 million in cash rewards to eligible borrowers nationwide as an incentive to remain current on their mortgage payments. To date, RH Rewards have been offered in 45 states, the District of Columbia and Puerto Rico. The size of the reward is dependent on many factors, including the size of the mortgage, the amount of negative equity, and region of the country.

As an aid to responsible homeowners who are thinking through their options, RHReward.com has created this chart comparing the impact of securing a loan modification through the government's HAMP program to receiving a cash reward through the Responsible Homeowner Reward program

  If the homeowner is approved for a HAMP modification... If the homeowner receives an RH Reward...
Who is eligible?    
Owner occupied Yes Yes
Investor home No Yes
Second/vacation home No Yes
Second lien Yes Yes
Does it help to repair the borrower's balance sheet? Maybe (only through a principal reduction) Yes
Does it reduce the borrower's monthly payment? In most cases No
Is it limited by loan size? Covers conforming balance loans only No limit. All loan sizes are eligible
Are there additional legal concerns for the borrower? Yes No
Does it have an impact on the borrower's credit score? Lower credit score No impact
Does it create documentation burden on the borrower? Yes No
Proof of hardship Yes No
Number of additional documents required 10 - 12 0
Does it require full loan re-underwriting? Yes No
Does it offer online enrollment? No Yes
Does the borrower receive an immediate cash incentive? No Yes. Typically 10% to 12% of the outstanding mortgage balance.
How long does it take to implement? Can take 3-4 months for a modification to be complete. Typically takes as little as 2-3 days from initial contact for the borrower to receive their cash reward.

"Most homeowners want to avoid strategic default, and we want to help keep them from defaulting as well," said RH Reward's Frank Pallotta. "The more information borrowers have on their financial options and the potential negative impact of a default on their credit rating, the better off they will be. We've already built the program and the turnkey platform; it's up to the banks to provide the reward."

Here's how RH Reward works:

  1. The eligible homeowner with negative equity is presented with an initial RH Reward amount.
  2. To keep their RH Reward status active, the homeowner must make full and timely mortgage payments.
  3. For a fixed period of time following enrollment, an additional amount of money will be added to the initial RH Reward amount for each month the homeowner maintains active status.
  4. Once the mortgage balance is satisfied either by sale of home, refinance of home, or paying off the mortgage, the homeowner can access the entire RH Reward amount - including using the reward money to retire the mortgage.

Because RH Reward is a private-sector solution to address strategic default, no government or taxpayer money is being used to fund the program. Ultimately, the size of the reward is a small fraction of what would otherwise be lost in a foreclosure. The program starts with a simple agreement between the lender and the borrower, resulting in an alignment of interests of all parties.

About RHReward.com
The Responsible Homeowner Reward is a unique program which aims to give responsible homeowners an alternative to strategic default. By providing a cash reward for timely mortgage payments, the RH Reward gives back to homeowners who are working to live up to their mortgage obligations. RHReward.com is an operating unit of Loan Value Group LLC. For more information, go to RHReward.com.

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