Unearthing of HARP & HAMP
In the aftermath of the financial crisis, which the country had undergone in recent times, the Federal Government came up with the Making Home Affordable program. This 2009 program was aimed at helping the homeowners keep their homeownership intact or to increase it and to avoid foreclosure. In case your mortgage loan is controlled by Freddie Mac or Fannie Mae and if you are current on your mortgage, then you will get the chance to refinance your mortgage loan into a low-interest fixed rate loan. If you are at risk of foreclosure and indeed facing difficulty to repay your debts, then you may be offered a home loan modification program. This offers you with a reduced monthly mortgage payments. The Making Home Affordable program has two main components – the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP).
The Home Affordable Refinance Program
The main purpose behind the introduction of HARP was to convert millions of Freddie Mac and Fannie Mae loans into stable, fixed rate low interest rate mortgage loans. The Home Affordable Refinance Program was only applicable to the mortgages backed by Freddie Mac and Fannie Mae. Here it is to be noted that nearly 50% of the mortgages of the country are backed by Freddie Mac and Fannie Mae.
Though the aim behind the introduction of HARP was to stabilize the home prices and to lower down the default rate, but this particular program had fallen short of expectations. Out of its target of 4 to 5 million homeowners, the program was successful to help only 900,000. Due to the poor success rate of the original program, in November 2011, the Federal Government introduced the HARP 2 program. In the new program, some relaxations were made in respect of the eligibility requirements. Anyways, in order to become eligible for HARP 2, your current loan-to-value (LTV) ratio should be more than 80% and you should be current on your mortgages. Again, the mortgage loan that you want to refinance must be secured against your principal residence.
The Home Affordable Modification Program
HAMP aims at offering a workable way for all the lenders to make mortgages more affordable in the short term through mortgage modification. It was expected that this particular program would benefit 3 to 4 million homeowners, however success rate was much lower than the original expectations. In order to become eligible for such program, you need to fulfill certain criteria. The loan amount should be less than a certain specified amount. The mortgage that you have taken should alsobe taken on your principal residence. Another criterion to become eligible for such program is that you should be at the risk of foreclosure – you may either have missed at least two payments or it may be the case that your payments on first mortgage have exceeded 31% of your gross income. Again, you should be financiallyin a tight spot for some genuine reason such as medical emergency, loss of job etc.
Despite limited success, the aims and the intentions of these of two programs were noble. The main aim was to assist the borrowers to increase their home ownership and to revive the housing market.