HARP To Be Extended Through Next June
Congress has been voting on whether or not to keep government funded programs that aid homeowners who are underwater in their mortgages, such as the Home Affordable Modification Program (HAMP) and the Federal Housing Administration Short Refinance Program. However, the FHA has recently decided to extend the Home Affordable Refinance Program (HARP) through June 30, 2012. The decision to cut the other programs has caused much debate between Democrats and Republicans. Both parties realize that government spending must be reduced in able for the country’s economy to recover. But while Republicans believe the solution is to cut the programs all together, Democrats don’t think the government’s actions should be so drastic; that instead changes to the programs should be tried prior to ending them completely.
HARP seems to be safe from termination because it’s one program out of the group that has proved it’s worth. HARP was designed for borrowers who want to refinance their mortgage, but due to the unfortunate market conditions, the value of their home is less than the principal they owe on their loans. Though most private lenders won’t help a borrower in this situation, HARP will. As long as the principal owed on their loan is not more than 125% of their home’s value. Programs such as HAMP have not, in the grand scheme of things, helped a significant amount of distressed homeowners. HAMP’S main purpose is to reduce the mortgage payments of underwater homeowners. However, “the typical program participant still faces monthly payment obligations amounting to more than 60 percent of pre-tax income”, according to Karen Dynan, Vice President and Co-Director of Economic Studies at the Brookings Institute. HARP on the other hand, has accomplished 600,000 closings since its start.
Obviously, the extension of HARP is good news for those that can benefit from it, but distressed homeowners with different circumstances may be on their own in the near future. It’s a sticky situation for both decision makers in Congress, and taxpayers alike. Cutting government spending is essential for an economic recovery, but unfortunately many homeowners will continue to struggle.
Courtesy of www.brookings.edu, personalfinancebulletin.com, and www.credit.com
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