Making Home Affordable — The US Government’s various efforts to keep homeowners homeowners
Making Home Affordable
Government’s various efforts to keep homeowners homeowners
The original Making Home Affordable program was enacted by the US Government by means of the Financial Stability act of 2009, with the intention of blunting the blow foreclosures were causing to the housing market. It contained two components that have had mixed success and was the subject of a recent announcement of additional support.
Here is a brief review of the two original components and the recent news.
Home Affordable Modification Program
This program was released with the intent of assisting homeowners delinquent on their mortgages and those in imminent danger of default by modifying the terms of the original loan to achieve sustainable monthly payments. The program has been widely criticized for the difficulty of successfully completing the documentation process, and for the perception that many homeowners re-default. As of September, of 3.9 million estimated homeowners who could be helped, 850,000 had received a permanent modification.
Home Affordable Refinance Program
This program was designed to help homeowners on time with their payments to refinance in spite of reduced home equity caused by the crisis. Provided the original lien was 80% or less of the original appraised value of the home, the program offers to refinance existing balances even if a new appraisal reveals borrowing as high as 125% of the current value without mortgage insurance. It was also intended to provide assistance to homeowners with mortgage insurance, however, that has been very difficult to access, as it is available only to the current servicer of the loan, and many are not participating in the program. Province Mortgage has closed a substantial number of these transactions.
2011 Changes to HARP
An announcement on October 24th, 2011 previewed several meaningful changes to HARP, which may improve eligibility options. While an announcement of actual specifications isn’t due until November 15th, some enhancements that have been suggested include:
- Reduced appraisal requirements
- Higher maximum loan-to-value ratio (over 125%)
- Reduced pricing surcharges for various associated risks
- Extended program duration to December, 2013
While many details remain uncertain, the hope is that this will expand eligibility to more borrowers helping more homeowners remain in their homes and, hopefully, providing a bit of economic stimulus with the extra cash those homeowners will have to spend.