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The Homeowner Affordability and Stability Plan (HASP) aka the Making Home Affordable Plan (MHAP) is the government's solution to stabilize the housing markets. The Obama housing plan is supported by the following programs:
- Home Affordable Refinance - Access to low-cost refinancing: to provide aid to qualifying homeowners so that they can access low-cost refinancing, the Obama's housing plan makes it possible for individuals to refinance their mortgages even if the equity in their property has fallen below "conforming loan" standards:
The HASP helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20%) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 5.36% as of 7/15/09).
- Home Affordable Modification Plan (HAMP) - Homeowner stability initiative: HAMP ; The housing plan calls for the government to invest $75 billion to provide incentives to mortgage lenders and qualifying homeowners to modify the terms of their loans through term-interest rate reduction (lower interest payments on their mortgages and longer periods of repayment) or principal reductions:
The Obama housing plan sets aside the $75 billion to help "responsible" homeowners avoid foreclosure. Who will these money help? In general, homeowners that are struggling (or are likely to struggle in the near future) to make their mortgage payments either because of a change in their situation (e.g. loss of income), or because the terms of their mortgages called for much higher monthly payments after an introductory period, as it was rather common in the sub-prime mortgage market. .
- FHA - Home Affordable Modification Plan (FHA-HAMP): Homeowners who have Federal Housing Authority (FHA) insured loans are able to take advantage of the HAMP and modify their loans if they are 1 or more months late/delinquent in their payments. Go to "FHA-Home Affordable Modification Plan" page for details of the plan.
- Home Equity Loan Modification (Second Lien Program) - Making Home Affordable: the housing plan was augmented to expedite modifications of first mortgages and to make it possible for homeowners that have home equity loans or other second liens on their properties to stay in their houses. The HASP offers a Second Lien program that provides incentives for services to modify or extinguish second liens once a first mortgage has been modified:
The government estimates that approximately 50% of all homeowners eligible for the housing plan's mortgage modification program have second liens (1 to 1.5 million). By introducing incentives to modify those loans, the program is expected to help those homeowners reduce their payments even further, and to improve the chances that the mortgage modification program would work.
- Keeping Mortgage Rates Low: To maintain mortgage rates at historical low levels the housing plan calls for recapitalizing Fannie Mae and Freddie Mac with another $200 billion, and increase their ability to purchase conforming loans. The HASP's goal of reducing mortgage rates is actively supported by the Federal Reserve through the purchase of conforming loan securities in the secondary markets:
The Obama housing plan is providing $100 billion in capital to Fannie and Freddie each through the Treasury, in the form of preferred stock. Furthermore, the portfolio size of the two GSE's (Government Sponsored Enterprise aka Freddie Mac and Fannie Mae) will be increased by $50 billion to $900 billion. In addition, the Federal Reserve has committed to buying $300 billion in long-dated treasury securities with the intent of keeping interest rates low - an effort that is succeeding.
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