Two federal programs intended to help struggling homeowners have been extended. The Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP), both launched in 2009 to boost the housing recovery by limiting foreclosures, were set to end in December.
At a speech in Los Angeles on Friday, Mel Watt, director of the Federal Housing Finance Agency, announced that the deadline has been pushed forward to the end of 2016.
HAMP uses funds from the Troubled Asset Relief Program to pay lenders to modify loans of troubled homeowners, creating more affordable payments. HARP allows borrowers with little or no equity in their home to refinance to a lower-interest rate mortgage.
“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. “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.”
Despite low interest rates and rising home values, many homeowners who could be taking advantage of these programs are not.
HARP refinancing has slowed significantly, even though a typical HARP refinance saves a homeowner on average $185 monthly on mortgage payments. In February, there was a 60 percent year-over-year decline in HARP loan closings.
In a state-by-state analysis of the number of loans that were eligible for HARP, the agency looked at conventional loans originated before June 2009 with an unpaid principal balance greater than 80 percent of the property value. The loans must have no delinquencies in the past six months and no more than one delinquency in the past year. The loan must have a remaining balance greater than $50,000, a term greater than 10 years and an interest rate at least 1.5 percent above market rate.
As of December 2014, FHFA found 604,678 homeowners across the country had mortgages that met this criteria and who could be taking advantage of HARP and were not. The states with the highest number of HARP eligible loans are Florida (81,422), Illinois (47,783), Michigan (46,302) and Ohio (45,168). Maryland had 17,326 HARP eligible loans, while Virginia had 15,954 and the District of Columbia 726.