President Obama Homeowner Affordability and Stability Plan

The nation has witnessed a number of reforms and regulations introduced by our President Barrack Obama. One of the most awaited regulations is the one relating to home loans and affordability plans. The recent Loan Modification Plan introduced by the President is expected to help home owners with their affordability of mortgage payments, either by way of refinance or loan modification. The Loan Modification Plan is beneficial only to those whose loans are held by Freddie Mac and Fannie Mae and are current on their payments. The fate of those homeowners who tend to lose their homes in the process of foreclosure is not covered.

President Obama’s Homeowner Affordability and Stability Plan

The Homeowners Affordability and Stability Plan (HASP) introduced last year benefit those homeowners who stay current on their mortgage payments. Till date close to 7 million homeowners are covered under this scheme. Stabilization of home prices that resulted in frequent foreclosures is supported by HASP. The cost of rearranging or more aptly called the restructuring of mortgages is shared among borrowers, lenders and the government, so as to enable borrowers stay on track with their monthly mortgage payments.

Atleast 4 million homeowners did benefit from this plan, wherein their monthly mortgage payments have been reduced substantially, so as to make it affordable and hence avoid the possibility of foreclosure. This plan primarily aims at reducing the monthly liability of borrowers.

Homeowners Loan Services

The loan service providers are required to reduce the monthly mortgage payment liability of borrowers to an amount that is less than 38% of their monthly earnings, either by way of modifying or restructuring the loan. The reduction in monthly liability is achieved either by reducing the interest rates on loan or extending the tenure of loan or in some cases even principle reduction.

Homeowners with high mortgage debt to income are eligible to apply for HASP. Borrowers having subprime loans with high rates of interest are also eligible to participate in HASP plan. It is understood that loan providers covering over 75% of loan disbursements have started initiating the process under Obama’s HASP.

The loan modification process having started it is assumed that Homeowner Stability Initiative will certainly benefit large number of borrowers.