FHFA: Past, Present and Future Impact of HARP and HAMP

At the apex of the housing market crisis of 2008 and 2009, the Federal Housing Finance Agency used two programs to stop the bleeding.

Home Affordable Refinance Program

HARP (Home Affordable Refinance Program) was designed to help borrowers whose loans were acquired by Fannie Mae or Freddie Mac before May 31, 2009. If people obtained a mortgage during that time and their home was worth less than owed, this program was there to assist them. Right now, HARP is intended to provide the lowest rates possible, that are currently available.

Home Affordable Modification Program

HAMP (Home Affordable Modification Program) was created for those unlucky individuals who lost their jobs during the financial disaster, and were left with crippling debt. The program, available for loans insured by Fannie Mae and Freddie Mac, had one specific goal: reduce mortgage payments to no more than 31% of a homeowners pretax monthly income. This can still be done by lowering interest rates, changing loan types, and extending terms.

Now the FHFA is extending both programs through 2016. Since the housing market, and overall economy, has been slowly returning back to normal in the past few years, the number of homeowners taking advantage of HARP and HAMP has steadily decreased. This is a positive sign for the nation, as we all try to put that economic catastrophe in our rearview mirror. So if things are improving at such a steady rate, then why are these programs still in existence? If someone’s home has lost value or is in danger of falling way behind on payments, then these two programs can help. After the housing bubble burst and home prices plunged, the government needed to create ways to assist those in need. Homeowners whose mortgage payments were currently underwater or almost underwater needed this relief in the worst way.

Mel Watt, the director of the Federal Housing Finance Agency (FHFA), had this to say when he announced that the deadline has been pushed forward to the end of 2016.

“Although the number of new borrowers entering these two programs continues to decline, in part because many eligible borrowers have already taken advantage of them and in part because of recovering housing prices, lenders and servicers are continuing to approve new HAMP modifications and HARP refinances,” Watt said, according to his prepared remarks handed out before the speech. “Extending HAMP and HARP through the end of 2016 will provide real relief for borrowers who continue to face challenges either paying their mortgage or refinancing their loan.”

Will these programs still be alive in 2017? If some homeowners are still in need, let’s hope so. But if we are on very solid footing, economically speaking, then let’s hope that HARP and HAMP will just become a federal program relic in 2016.