In 2009, the Federal Government instituted an array of programs designed to support homeowners and the housing market following the subprime mortgage crisis. One of them was the Making Home Affordable program.
Making Housing Affordable was designed to help stabilize the housing market, and support eligible homeowners by lowering monthly mortgage payments and helping to avoid foreclosures. The Federal Government allocated $75 billion to the program with the purpose of assisting homeowners through refinancing and modification of mortgages.
These ends were advanced by several specific programs that fell under the Making Home Affordable program umbrella. Those included:
- Home Affordable Modification Program (HAMP)
- Principal Reduction Alternative (PRA)
- Second Lien Modification Program (2MP)
- Home Affordable Foreclosure Alternatives Program (HAFA)
Background on the MHA
The MHA was established in response to the disastrous subprime mortgage crisis of that era, and the long-lasting disruptive effects it had upon the housing market. The primary goal was to help support struggling homeowners avoid foreclosure and keep a roof over their heads.
The MHA was passed in conjunction with other acts designed to protect homeowners within the Troubled Asset Relief Program, such as the Hardest Hit Fund. The Troubled Asset Relief Program, in turn, was part of the Emergency Economic Stabilization Act of 2008, one of the first pieces of legislation to address the subprime mortgage crisis directly. TARP was initially allocated with $700 billion in federal funds.
The HHF was a specific program targeted towards the states most heavily affected by the crisis. MHA, on the other hand, was a broader program designed to help homeowners nationwide. MHA took several tactics, including interest rate reduction, fixing interest rates, principal reduction, term extension, and more.
The MHA was designed to encounter a large-scale crisis in a wide variety of ways. Accordingly, it had a wide range of different sub-programs within it.
Programs within the MHA
HAMP was the most significant aspect of the Making Home Affordable program. Designed to help homeowners avoid foreclosure, it helped provide reduced monthly mortgage payments for homeowners who could document financial hardship while also demonstrating an ability to pay off their mortgage under the altered terms.
HAMP worked with mortgage servicers to negotiate loan modifications for homeowners who qualified under the above specifications. The median loan reduction was more than $530 per month for qualifying families. But HAMP was not the only program.
The Principal Reduction Alternative was created for families whose homeownership was “underwater” – that is, where the amount owed on the mortgage loan exceeds the current value of the home itself. The PRA was eligible to homeowners with a debt-to-value ratio of 115% or higher. The Home Affordable Unemployment Program, meanwhile, negotiated temporary forbearance (a period where monthly payments are deferred) for unemployed homeowners.
The Home Affordable Foreclosure Alternatives Program, meanwhile, was designed for homeowners facing foreclosure to help them find a more affordable living situation through a short sale. And finally, the Second Lien Modification Program created an avenue for homeowners to modify their second liens if they received a first lien modification through the MHA.
There is a wide variety of requirements to be eligible for benefits under the Making Home Affordable program. They include a first-lien loan with an unpaid principal up to $729,000; a property that is not condemned or uninhabitable; income documented via a signed 4506-T; a signed affidavit affirming financial hardship.
The net present value test is a complicated calculation that plays a significant role in MHA eligibility. The rest of the guidelines can be found in the condensed MHA guidebook.
Millions of homeowners were helped by the programs within the MHA. Today, many of the MHA’s programs have closed or expired, while others have been modified. However, MHA remains an active program.
Visit makinghomeafforable.gov to explore current MHA offerings. The most prominent service is mortgage loan counseling, wherein a counselor approved by the Department of Housing and Urban Development guides homeowners through the mortgage loan process. The goal is still to avoid foreclosures, but now preemptively, by helping borrowers take our smart, responsible loans that fit with their needs.
Other services include FAQs, glossaries, advice on applying for mortgage assistance and avoiding scams, and more. In addition to the website, you can call the hotline at 1-888-995-HOPE.
The Bottom Line
The subprime mortgage crisis had devastating, long-term effects for homeowners and the housing market in the United States. One of several programs designed to combat these effects was Making Home Affordable, also known as the MHA.
Many of the programs under the MHA banner were established only for a limited period of time, and have accordingly been exhausted. But even if you’re not already enrolled, the program still exists to this day, providing counseling, FAQs, advice on applying for assistance, and tips to avoid scams, and plenty more.