The American Reinvestment and Recovery Act of 2009, the 2009 economic stimulus bill, provided an opportunity for homeowners in trouble to qualify for mortgage modifications. The Home Affordable Modification Program (HAMP) and the “Making Home Affordable” provided support for lenders who worked with homeowners.
Part of the requirement for qualifying for the modification program is for borrowers to have missed a number of payments. This put homeowners who could benefit from the program, in trouble but not yet delinquent, in a tough position. They would need to skip payments, even if they could pay, ruining their credit in the process. In addition, lenders made it difficult to qualify, with understaffed departments handling the cases, a lack of communication, mixed messages from customer service, and overall disorganization.
A more pressing problem with HAMP was that borrowers were required to owe less than 125% of a home’s value — and in a tough market where home values were falling, it was much easier for a homeowner to find himself in that position — and to have a high credit score.
Without HAMP delivering the desired effect, the Obama administration is looking at improving the concept as a part of the latest economic stimulus package. A third round of quantitative easing is unlikely to gain wide support, at least not in that form, so the federal government is looking for ways to reduce the risk of a second recession, a double-dip recession, or any other type of economic problem.
The Obama administration is seeking feedback on a new round of stimulus designed to help more homeowners qualify for a mortgage refinance. After a decade of lax lending standards, following the recession and credit crunch they have tightened, making it difficult for consumer with marginal credit histories — or even something not too out of the ordinary, like self-employment income without W2 income — to qualify. The new program will seek to allow more homeowners to refinance at a time when mortgage interest rates are very low.
Another aspect of this program would take federally-owned housing and convert the buildings into rentals, turning them over to investment firms to manage.
The plan could actually help pay down the deficit, as there are unspent funds that have been set aside for stimulus:
The idea is appealing because it would not necessarily require Congressional action. It also would not tap any of the $45.6 billion in Troubled Asset Relief Funds that was set aside to help struggling homeowners. Only $22.9 billion of that pool has been spent or pledged so far, and fewer than 1.7 million loans have been modified under federal programs. But Andrea Risotto, a Treasury spokeswoman, said whatever was left would be used to reduce the federal deficit.