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Analyzing The Making Home Affordable Program created by Obama

The Obama administration created the Making Home Affordable program in 2009 to help homeowners who were threatened by foreclosures from the housing market crisis. The homeowners were underwater, and their mortgage costs were more than the falling housing values. They could not sell their homes without being in debt to the banks. Many of them had lost their jobs and were trapped in foreclosures because the banks had refused to make loan modifications.

The Making Home Affordable program consisted of two components: the Home Affordable Refinance Program and the Home Affordable Modification Program. Republicans did not support the program claiming it led to deficit increases. They argued that the homeowners should have been held responsible for the signed mortgage contracts.

HARP allowed qualified homeowners who had mainly kept up with payments to refinance Fannie Mae and Freddie Mac loans into fixed-rate, 15- or 30-year low-interest mortgages. Four million homeowners were expected to qualify for the program, but by mid-2011, only 900,000 had successfully used it.

HARP was reformatted into HARP 2 by November 2011 with major changes that included no loan-to-value ceiling, no credit score requirement, faster underwriting and less restrictions as long as one was current on their mortgage. HAMP had been fashioned for those homeowners who had experienced a financial hardship, their mortgages exceeded 31 percent of their income and they were at risk of foreclosure.

Through early 2012, there has been a better response to the more flexible HARP 2. It appears that improved publicity has brought in more homeowners and, importantly, more responsive lenders. Major banks, feeling possible profit losses, had been initially slow to process HARP.

By the end of 2010, a quarter of all homeowners were underwater. Real estate researcher Zillow reported that at the end of the first quarter this year, 15.7 million people were underwater, representing one of every three homeowners. Foreclosures have been served on 2.5 million homes and 4.5 million homeowners had stopped paying mortgages.

The Obama programs began tenuously and in a contentious atmosphere of heavy criticism from Republicans who did not want to allow funding. Costing nearly $50 billion, the programs are expected to help some two million homeowners by year’s end and possibly many more.

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