The federal government is extending for another year two programs designed to help homeowners who are at risk of defaulting on their mortgage or still owe far more on their loans than the properties are worth.
The Home Affordable Modification Program and the Home Affordable Refinance Program will be extended until the end of 2016, announced Mel Watt, director of the Federal Housing Finance Agency. The programs were scheduled to end Dec. 31.
Both programs were unveiled by President Barack Obama shortly after he took office in 2009 to help financially struggling homeowners who have mortgages backed by Fannie Mae and Freddie Mac save their homes rather than lose them to foreclosure.
The loan modification program was designed to bring a borrower’s payments down to a more affordable level by temporarily cutting the interest rate or extending the term of the loan but without a principal reduction. The refinance program enables a homeowner who is current on payments but underwater to refinance the loan and benefit from lower mortgage interest rates.
“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 house prices, lenders and servicers are continuing to approve new HAMP modifications and HARP refinances,” Watt said in prepared remarks that were to be delivered in a speech in Los Angeles. “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.”
Watt said it will be the final extension of the HAMP program and is anticipated to be the final extension of HARP. Watt said more than 600,000 borrowers nationally remain eligible for the refinancing program.
In the fourth quarter of 2014 alone, more than 74,000 homeowners in the Chicago area started permanent loan modifications under HAMP, and the median monthly mortgage payment decreased by about $519, a 41 percent reduction from their original median monthly payment, according to a Treasury Department report.