Foreclosure prevention program revamp
Last fall, President Obama made a controversial move by bypassing Congress and moving forward with an executive order to fix housing by issuing the second phase of the Home Affordable Refinance Program (HARP) which eliminates fees and appraisal process, along with other adjustments.
This week, the Obama administration announced that they are taking a similar approach seeking to improve the Home Affordable Mortgage Program (HAMP) by expanding eligibility to mortgage holders with higher debt loads and the new phase of HAMP triples the incentives it pays banks that reduce principal on loans, a move the administration has been strongly advocating.
Despite the Federal Housing Finance Agency (FHFA) which regulates Fannie Mae and Freddie Mac asserting in a statement that pincipal reductions at Fannie and Freddie would cost taxpayers another $100 billion, the administration also announced this week that it would offer incentives to Fannie and Freddie to reduce principal on loans which previously was only offered to private entities and banks.
Extending HAMP
HAMP was set to expire at the end of 2012, but has been extended to expire in December 2013 and all new changes will take effect in April. In the most controversial portion of the announcement, HAMP will now apply to owners of rental properties as HUD Secretary Shaun Donovan said in a press event this week is a necessary measure to avoid foreclosures which immediately drag down values in a neighborhood. Some consider this an investor bailout which has already come under fire.
The FHFA responded in a statement by noting it would consider implementing changes to the program, a far different tune than their staunch position against any principal forgiveness. Some form of the administration’s plan will likely be implemented, but it is doubtful that the entire plan as outlined above will make the cut.
The new changes would not require new funds, as HAMP has been funded by billions of taxpayer dollars, more than half of which has not been spent. Nowhere near five million homeowners have been helped that the administration promised HAMP would accomplish, so more tweaks have both sides of the aisle skeptical.
