When the Obama administration started the Making Home Affordable program, they did so with the hope that homeowners would be able to utilize the individual programs to save themselves from default and foreclosure, and to regain control of their mortgages. Too many people experienced financial loss due to the economic downturn; the government wanted to slow this flow of loss. In an effort to meet the demands of homeowners, there are multiple refinance programs that fit under the umbrella of Making Home Affordable. One of these programs is the FHA Home Affordable Refinance Program and another is the Home Affordable Modification Program. With these two options many homeowners have been able to adjust their mortgages to better suit their needs, while simultaneously avoiding default and foreclosure.
The FHA Home Affordable Refinance Program
For most homeowners, when they find themselves in a situation where they have little or no equity in their home or, worse, they owe more on the home than it is actually worth, refinancing is not an option. Most lenders are not willing to take on a situation that risky. But by refinancing you can often lower your interest rate and monthly payment, which would really help the struggling homeowner. Knowing this, the FHA Home Affordable Refinance program is targeted to homeowners who are dealing with situations where they don’t have equity but need to lower interest rates.
In order to take advantage of the FHA Home Affordable Refinance program you have to have less than eighty percent equity in the home, although most homeowners will probably have no equity in the home. You also need to be in good standing on the mortgage with no missed or late payments over the last twelve month period; you have to show that you can meet the requirements of the new loan if you are approved for the refinance. In addition to this, your loan must currently be controlled by a lender that follows the Freddie Mac/Fannie Mae underwriting guidelines, and that loan must have been acquired or bought by a conventional lender prior to May 31, 2009.
HAMP – Home Affordable Modification Program
A second program you can use through Making Home Affordable is the Home Affordable Modification Program (HAMP). While this program may seem similar to HARP, there is one glaring difference and that difference is the fact that this is simply a loan modification, not a refinance. Oftentimes through the Home Affordable Modification Program homeowners are able to reduce their monthly mortgage payments, which for many is the key to saving their mortgage from default.
In order to qualify for this program you need to prove that you are dealing with a mortgage that is more than you can handle, but you can’t be living in a condemned property either. While HARP is for homeowners who are current on their mortgages, the Home Affordable Modification Program is for homeowners who are facing the possibility of defaulting on their loan, or who have already fallen into default. It is also required that you provide your financial history so the lender knows exactly what you’re dealing with. This financial history has to prove to the lender that you are capable of handling the new loan should you get a loan modification.
A final requirement is that the loan must have been acquired prior to January 1, 2009. As with the HARP, this program is for homeowners affected by the sudden economic downturn that occurred a few years ago. Homeowners who have found themselves in upside down mortgages that were secured after 2009 won’t be able to qualify.
It’s worth mentioning that the Home Affordable Modification Program isn’t supposed to be the first option for homeowners facing default. Typically it is preferred if you’ve gone through other routes to obtain modification and had those routes fail. The modification program supplied through the Federal Housing Administration should be considered as a back-up plan, kind of a last resort thing to try if all else fails.
These programs are not the only programs available to homeowners through Making Home Affordable. However, through these two programs many homeowners have been able to return to financial situations that they are in control of, rather than the other way around. They are also not a permanent part of the real estate landscape. Both of them are set to expire within the next couple of years so if you want to take advantage of either of them, you will need to do so soon in order to get the greatest benefit.