Programs to Stop Foreclosures
On Feb. 18, 2009, President Barack Obama unveiled the Homeowner Affordability and Stability Plan (HASP), a federal initiative to encourage lenders to refinance homeowners current on their mortgage payments and to modify the loans of homeowners who don't qualify for refinancing. HASP builds on prior programs, such as HOPE NOW and FHASecure, to help mitigate the foreclosure crisis.
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HASP: Refinancing Provision
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The refinancing portion of HASP offers homeowners the opportunity to refinance to a lower interest rate at higher loan-to-value (LTV) ratios than usual to account for collapsing market values. To qualify for this program, the original mortgage must be owned or guaranteed by federal mortgage programs Fannie Mae or Freddie Mac and the original loan cannot be a jumbo loan. The property also must be occupied by the owner.
HASP: Loan Modification Provision
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If the lender agrees to lower the monthly payment to 38 percent of the homeowner's income, the government will pay half the cost to lower the payment to 31 percent. The house must be owner-occupied, and income documentation is required. Homeowners who cannot demonstrate an ability to pay at the 31 percent level would not qualify.
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HASP: Bankruptcy Provision
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A "cram down" provision included in HASP would enable bankruptcy court judges to modify the terms of mortgages for homeowners in bankruptcy. The term "cram down" refers to lenders' not having a say in the terms.
However, implementation of this provision requires new law, and the Senate defeated legislation enabling bankruptcy modification on May 7, 2009. President Obama signed the Helping Families Save Their Homes Act of 2009 on May 20, 2009, without the cram-down provision.
Previous Programs
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HASP is a modification of the HOPE for Homeowners Program, which was launched by President George W. Bush in October 2008. In addition to the changes mentioned above, HASP also increased the incentive fee for lenders to offer loan modifications before default from $1,000 to $1,500.
FHASecure, created in 2007 under President Bush, offers refinancing of non-HUD ARM loans.
HOPE NOW
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HOPE NOW is a joint venture between the federal government and lenders to counsel the public on foreclosures. Their homeowner assistance hotline is 888-995-HOPE.
HOPE NOW also instituted Project Lifeline, a program that allows homeowners to temporarily halt foreclosure proceedings.
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