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Falling house values have been at the forefront of the current financial crisis.
The Homeowner Affordability and Stability Plan HASP is an ambitious program by the Obama administration to address the mortgage crisis. It entails $75 billion in direct spending a $200 billion invested in Fannie Mae and Freddie Mac.
President Obama's hope is that it will help 7 - 9 million current homeowners.
What Exactly is HASP - Affordability Housing?
It's a plan to keep a specific subset of current ‘at risk' homeowners in their homes and avoid foreclosure. It's a complicated plan the details of which were recently released March 4th. Basically the government will spend $275 billion to entice lenders to agree to these new rules and enticements to homeowners themselves to act responsibly.
Two groups of people would benefit directly from the President's plan.
- Homeowners who are in poor financial situations (troubled borrowers), who may be delinquent on their mortgage payments, who have monthly mortgage payments that exceed 38% of their pre tax monthly income, and who are in immediate danger of losing their home.
- Homeowners who are current with their mortgage payments but who have high interest rates, little or no equity, and can't refinance under current banking rules. It would be targeted at homeowners that pay 31% or less of pre tax income in mortgage payments and whose outstanding loan is not more than 105% of the value of their home.
HASP is Multi-pronged Approach
Along with the direct financial aid to homeowners, HASP would pump $200 billion into Freddie Mac and Fannie Mae to encourage lending and current mortgage renegotiating. It would give bankruptcy judges enormous power to force lenders to accept new mortgage terms - payments, principle amounts, interest rates, etc. (This part of President Obama's plan would require Congress to change current law.)
How Can You Get HASP Money?
Your lender will learn the details of this mortgage program on March 4th. Once the details are publicly available you should stay in regular contact with your lender about your specific options. In the meantime, gather your financial documents.
- File your 2008 taxes
- Balance your checkbooks
- Gather your pay stubs for the last 12 months
- Gather your bank statements for the last 12 months
- Add up your total debt (credit cards, car loans, student loans, etc) and your total minimum monthly payment on that debt
And remember
- Loans must have originated on or before January 1, 2009.
- Mortgages must be for a single-family residence with a loan balance no greater than $729,750.
- Loans can only be modified once beginning March 4, 2009 through December 31, 2012.
- Home cannot be vacant or condemned and must be a primary residence-not investor owned.
- Interest rate can be lowered to as low as 2 per cent and the term of the mortgage can be extended to a maximum of 40 years in order to maximize the reduction in loan payment.
- Borrowers will need to provide an "affidavit of financial hardship", their most recent tax return, and two recent pay stubs.
- Service providers will be required to follow a sequence of steps that modify the loan in order to reduce the monthly loan payment to no more than 31% of gross monthly income.
- Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years
Your Affordability Home
How much you can spend on a house is dependent on various factors: your income, how much you are qualified to borrow, your monthly expenses, and the amount of your down payment. Below are the two best mortgage calculator options; (sometimes called a home affordability calculator) they can provide a general idea of what you can afford, but it is always best to visit a lender and actually get pre-approved for loan as this will provide you exact numbers.
Most lenders will require a 20% (of the final purchase price) down payment, but there are programs available where you will need as little as a 5% down payment.
Related Articles:
- 2009 Mortgage Bailout
- 2009 Mortgage Bailout Executive Summary
- Loan Modification: Is it Right for You?
- Avoiding Foreclosure Rescue Scams
- What Is A Short Sale?
- What Is A Deed-In-Lieu?
- How To Avoid Foreclosure
- Do You Qualify for an FHA Loan?
