RES 334 Week 1 Assignment: Mortgage Relief

Mortgage Relief

RES334

Real Estate Finance

Mortgage Relief

The housing bubble of 2008 caused problems not only for the stock market but also for financial institutions and consumers as well. Due to the radical increase in home values and sales, a bubble was created. Home values where grossly overstated and those values resulted in huge loans self-correction was inevitable. The bubble finally popped, and homeowners found themselves upside down in their mortgages (loan is more than the home is worth), and thanks to the bubble finally popping businesses where closing left and right or scaling back their workforce. Finally, the United States government had to step and save the economy from its free fall the government bailed out the financial institutions deemed “Too Big To Fail” (TBTF describes the concept whereby a business has become so large that a government will provide assistance to prevent its failure because not doing so would have a disastrous ripple effect throughout the economy.) relief programs. The most popular are HARP and HHF.

HARP

HARP (The Home Affordable Refinance Program), was created by the Federal Housing Finance Agency in 2009 (after the U.S. housing bubble burst in 2008) to assist homeowners who are current on payments but have little to no equity in their homes refinance their loans for a lower interest rate (HARP, 2014). This program initially was not designed for homeowners who were upside down in their mortgage; however, this has since changed. According to Fannie Mae, a homeowner may qualify for HARP if:

HHF

1. “You have had a good payment history (no late payments in the last six months and no more than one 30-day late payment from 6 to 12 months ago) for the past 23 months.
2. Your home is your primary residence, 2nd home or investment property.
3. Your home value has decreased.
4. You have limited equity, or your first mortgage exceeds the current market value of the home (i.e., your loan-to-value ratio must be >80% to be eligible).
5. Your loan is owned or guaranteed by Fannie Mae or Freddie Mac. Check the Fannie Mae Loan Lookup tool.
6. Your loan was closed on or before May 31, 2009 (this date can be found using the loan lookup results)” (Fannie Mae, 2017).

HFF (The Hardest Hit Fund), was established by the United States Treasury in 2010 after releasing a large part of the economy that HARP was meant to help could not qualify for HARP. This fund is meant to provide aid to homeowners in the eighteen hardest hit states that suffered the most from the subprime mortgage crisis. Initially, this program was allocated $1.5 billion for five states it has since been increases to $10 billion for 18 states. It is also a part of the Troubled Asset Relief Program. Although the program varies from state to state, it includes:

The states which are a part of this program were chosen based on two categories, unemployment rates, and steep home price declines. In 2016 the Consolidated Appropriations Act allocated an additional $2 billion towards the Hardest Hit Fund – which is available to eligible homeowners until 2020 (Macheel, 2016).

1. “Mortgage payment or reinstatement assistance for unemployed or underemployed homeowners
2. Funds to help homeowners pay down the principal balance of a mortgage loan and allow for a more affordable monthly payment
3. Help for homeowners who are transitioning out of their homes into more affordable places of residence
4. Blight elimination to help stabilize neighborhoods and
5. Down payment assistance for homebuyers” (Fannie Mae, 2017).

References

Fannie Mae. (2017). Home Affordable Refinance Program. Retrieved from https://www.knowyouroptions.com/refinance/home-affordable-refinance-program

Home affordable refinance program (harp). (2014). In J. Downes, & J. E. Goodman, Dictionary of finance and investment terms (9th ed.). Hauppauge, NY: Barron’s Educational Series. Retrieved from http://search.credoreference.com.proxy-library.ashford.edu/content/entry/barronsfin/home_affordable_refinance_program_harp/0

Investopedia, (https://www.investopedia.com/terms/t/too-big-to-fail.asp#ixzz5SXZVvm00)

Macheel, T. (2016). Treasury to Add $2B to ‘Hardest Hit’ Fund for Homeowners. American Banker, (35).

U.S. Department of the Treasury. (2017). Hardest Hit Fund Program Purpose and Overview. Retrieved from https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/default.aspx