In 2009, Congress passed the Homeowner Affordability and Stability Plan to provide options to financially struggling homeowners. The Treasury Department touted it as a $75 billion program to help up to nine million homeowners avoid foreclosure. It was supplemented by $200 billion in additional funding for Fannie Mae and Freddie Mac to purchase and more easily refinance mortgages.
One of these options offered to homeowners is a federally regulated loan modification program that gives certain incentives to mortgage loan servicers and homeowners for participation in the program; a loan modification changes the terms of the mortgage loan based on the Plan’s regulations so that a homeowner can better afford the payments and avoid the risk of foreclosure.
The Plan also contains the Home Affordable Refinance Program, which allows certain homeowners to refinance their mortgage loans. Typically, loan servicers will not permit refinancing where a homeowner has less than 80% equity in his or her home, which has become more and more common as home values have declined in the current recession. Under the Refinance program, however, even homeowners who have less equity may be able to refinance into fixed rate mortgage loans that take advantage of the historically low interest rates.
Participation by mortgage loan servicers in each of these programs is voluntary, so if you are interested in either program, you’ll need to make sure that your loan servicer has signed a contract with the government in order to participate in the program. You can do this by checking the list of participating loan servicers online
or by contacting your loan servicer directly.
Will the Homeowner Affordability and Stability Plan (HASP) save my home from foreclosure?
It is possible that the Plan may save your home from foreclosure, but there are no guarantees. Many loan servicers have already stopped foreclosure proceedings on a temporary basis, and the Plan encourages loan servicers to stop filing foreclosures on loans until they have been evaluated for loan modifications under the Plan. Therefore, it is possible for you to enter into a loan modification with your loan servicer, and thus avoid foreclosure. However, if you have not yet discussed your situation with your loan servicer, you should contact your loan servicer immediately to see if you qualify for a loan modification.
Am I ineligible for HASP loan modification if I’m current on my mortgage payments?
No. You may still be eligible for a loan modification under the Homeowner Affordability and Stability Plan if you are current in your mortgage payments, but you are struggling to make those payments. For instance, if you have had a significant increase in your mortgage payment due to an adjustable interest rate, or if you have had a decrease in income, you may be eligible for a loan modification.
If you meet the minimum eligibility requirements for a loan modification as outlined above, then your loan servicer is required to evaluate your loan in order to determine whether you are at risk of imminent default, which means that some circumstances in your life exist that make it very possible that you could default on your mortgage loan and/or lose your home to foreclosure. If your loan service considers your loan to be at risk of imminent default, then you are entitled to a loan modification, regardless of the fact that you are still current on your mortgage payments.
What about the Making Home Affordable (MHA) program?
In early 2009, the U.S. Treasury launched the Making Home Affordable (MHA) program to help struggling homeowners avoid foreclosure. MHA is only one part of the Obama Administration’s broader efforts to strengthen the housing market. You may be able to refinance your mortgage under the Making Home Affordable Plan if:
- You are the owner occupant of a one to four unit home;
- The loan on your property is owned or securitized by Fannie Mae or Freddie Mac;
- At the time you apply, you are current on your mortgage payments (current means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months or, if you have had the loan for less than 12 months, you have never missed a payment);
- You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house;
- You have income sufficient to support the new mortgage payments; and
- The refinance improves the long term affordability or stability of your loan.
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