Forget Obamacare, The President’s true signature program was Making Home Affordable

On December 31st The Making Home Affordable Program (MHA) will official expire. MHA has been know by several other names through its life: “Hope Now”, “Hope for Homeowners”, “HAMP”, and especially in its early days “The Obama Plan”

The groundwork for the plan was actually laid by President Bush in the TARP program in late 2008, the incoming Obama team crafted the rules for the program and it first became available to homeowners in mid 2009. Making Home Affordable is an umbrella that oversees three distinct home owner programs:

Home Affordable Modification Program (HAMP) intended for people struggling with or behind on mortgage payments,

Home Affordable Refinance Program (HARP) intended for homeowners who had made all their mortgage payments but owed more than their house was worth,

and Home Affordable Foreclosure Alternatives (HAFA) intended for homeowners who wished to sell their home before losing it to foreclosure.

Of the three the most popular and important is HAMP. HAMP is not a new loan or a government funded workout plan, nor is it a program that a homeowner can just sign up for and expect automatic changes to their loan. It is a set of guidelines that standardized the documents required for modification review, the affordability guidelines for modifications, and the tools that the mortgage company can use to achieve that affordability. It also established an online data sharing platform for submitting documents to lenders and communicating with them during the review process.

Before HAMP structuring a modification with a lender was a guessing game. Each mortgage company had their own requirements for documentation, had their own determination for what was affordable, and their own tools to get to that affordable level. The rules could even vary within the same lender depending on the loan type. Adding to the confusion is some lenders refused to consider modifying loans at all, or looked at them only if simpler options like repayment plans would not work. On top of all of that lenders had their own rules for what to do with homeowners who had been on a workout plan but fell behind again. I can’t remember the number of times I called a lender on behalf of a homeowner who had a workout plan and then fell behind again only to be screamed at by the lender.

The process of submitting documents to the lenders was equally as frustrating. Typically it involved collecting the documents that we thought the lender was likely to need to review the loan including a third party authorization form which the lender may not honor. Along with those documents we would include a workout proposal which would ask for changes to the mortgage based on a rough estimate of what we thought might be allowed on the mortgage. Certain loans like FHA did have guidelines to follow and as you worked with the same mortgage companies over and over you would start to get a better idea of what documents were needed and the likely workout options but the work was still slow going with very little support from the mortgage company. Additionally the only real way to submit documents was by fax, this meant mortgage companies were getting thousands of faxed pages per day, they were often illegible damaged or misplaced. It could sometimes take weeks before the mortgage company would confirm having the correct documents to even start the review, and the timetable for the review its self was entirely up to the mortgage company.

HAMP helped to establish order over this entire mess. For the first time most lenders were accepting the same forms, uploading them electronically, confirming that they received them and then conducting the workout review under a standard set of rules. HAMP also required that foreclosure actions, with some exception be put on hold while the workout review was under way and establish a time line for the length of the workout review. HAMP also established rules for second and third lien mortgages and mortgages on properties the homeowners did not live in, which were previously all but imposible to modify.

At least 2 million homeowners have received HAMP modifications, critics from the program point out that nearly that many have been reject from the program. But that it is a little misleading, HAMP does have strict and rigid requirements for qualifications but it also provides an appeal process for anyone denied a HAMP mod. More importantly it requires that if the homeowner is denied for HAMP the mortgage company mortgage company most look at other options. Often called in house options these are changes to the mortgage that the mortgage company or investor will allow, often the guidelines for these programs are more flexible than HAMP and the workout terms are often as good or better than HAMP. A majority of my clients did not qualify for HMAP but instead received an in house modification. Its likely that review would never have happened and the final workout would not have been as favorable had the HAMP guidelines not existed.

Foreclosure numbers are now down to pre 2008 crisis levels and home values are continuing to climb. We have not gained back all that was lost in the 2008 crash but we are certainly further along the road to recovery than we would have been without Making Home Affordable. As the foreclosure crisis subsides the severity of the situation has faded in many people’s minds. Making Home Affordable is hardly mentioned as part of President Obama’s legacy but it should not be forgotten. Its legacy with continue past the end of this year HARP with continue until at least September 2017 and most mortgage companies will continue to use the documentation and review guidelines established under HAMP even after the program goes away. Having worked with homeowners before MHA I can personally say that it did more to save the housing market than any other action taken by the government in the last 50 years.

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