Definition
The Homeowners Affordability and Stability Plan (HASP) is a U.S. government initiative introduced in 2009, designed to help struggling homeowners avoid foreclosure by providing cost-sharing incentives to lenders for modifying mortgage terms. Funded primarily by the Housing and Economic Recovery Act of 2008, HASP facilitates lowering homeowners’ monthly mortgage payments (PITI — principal, interest, taxes, and insurance) to 31% of their gross monthly income. This is achieved by inducing lenders to initially reduce payments to 38% of income, with further reductions subsidized by the government.
Examples
- John’s Mortgage Adjustment:
- Current mortgage: $2,000 monthly, 50% of his income.
- After HASP: Reduced to $1,240, made possible through interest rate reduction and principal adjustment. The remaining reduction to get to 31% of John’s income is shared by the lender and the government.
- Sally’s Mortgage Forgiveness:
- Due to unexpected job loss, Sally’s mortgage payment amounts to 60% of her income.
- HASP incentivizes the lender to adjust her mortgage terms, potentially deferring or forgiving part of the mortgage balance to bring the monthly payments to sustainable levels.
Frequently Asked Questions (FAQs)
What is the primary objective of HASP?
Answer: The objective is to prevent foreclosures by making mortgage payments more affordable, reducing them to 31% of the homeowner’s gross monthly income.
How is the HASP funding sourced?
Answer: It is primarily funded by the Housing and Economic Recovery Act of 2008, with an initial funding of $75 billion and additional support from $200 billion directed to Fannie Mae and Freddie Mac.
Which homeowners qualify for help under HASP?
Answer: Homeowners facing hardship making their mortgage payments, particularly those spending more than 38% of their monthly income on mortgage payments, can qualify for modification assistance through HASP.
Can principal balance be reduced under HASP?
Answer: Yes, the plan includes provisions for lenders to forgive, defer, or change the principal amount to help reduce the monthly payment obligations.
What entities are involved in implementing HASP?
Answer: Lender institutions, serviced by guidelines and funding from government entities and supported by Fannie Mae and Freddie Mac, are actively involved in implementing the HASP.
Related Terms
- Housing and Economic Recovery Act of 2008: Legislation that provides the principal funding for HASP, aimed at stabilizing the housing market.
- PITI: An acronym for Principal, Interest, Taxes, and Insurance, which together comprise the monthly payment that HASP aims to reduce.
- Loan Modification: A long-term solution to help make a mortgage payment more affordable.
- Foreclosure: The legal process by which a homeowner’s right to a property is terminated, typically due to default on mortgage payments.
Online Resources
- Making Home Affordable (MHA)
- U.S. Department of Housing and Urban Development (HUD)
- Federal Housing Finance Agency (FHFA)
References
- U.S. Treasury Department, “Making Home Affordable Program,” available at https://www.treasury.gov.
Suggested Books for Further Studies
-
“The Housing Boom and Bust” by Thomas Sowell
- A detailed examination of the housing crisis and the factors leading to the creation of programs such as HASP.
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“The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash” by Charles R. Morris
- Insightful context on the financial conditions leading to the establishment of HASP and similar foreclosure prevention programs.
