The government's Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP) will be extended until the end of 2016, according to an announcement from FHFA Director Mel Watt on Friday.
Speaking at the Greenlining Institute 22nd Annual Economic Summit, Watt announced a one-year extension of HARP, which was set to expire at the end of this year. The one-year extension until the end of 2016 for HAMP was previously announced in July. Both of the government's affordable housing programs began in 2009 in response to the housing crisis.
"Since HAMP and HARP were first launched in 2009, these programs have provided critically important relief for many borrowers by allowing them to lower their monthly payments and, as a result, have prevented many foreclosures," Watt said. "HAMP provides modifications that allow borrowers significant payment reductions that are tied to their income. This gives borrowers a more stable, affordable monthly payment and improves performance rates. The HARP program allows borrowers, including those who are underwater on their mortgage and who are regularly making their mortgage payments, to refinance their loans to take advantage of historically low interest rates."
HARP is a program intended to help save money by lowering monthly payments for borrowers who are underwater but are regularly making mortgage payments, while HAMP is targeted toward borrowers who are delinquent and possibly facing foreclosure by providing them a modification with significantly reduced monthly payments tied to their income.
The participation rates for both programs have on the decline, partly because many borrowers are already participating in one program or the other, and partly because of recovering house prices, Watt said, but lenders and sevicers continue to approve modifications through HAMP and refinances through HARP.
"Extending HAMP and HARP through the end of 2016 will provide real relief for borrowers who continue to face challenges either paying their mortgage or refinancing their loan," Watt said.
Watt said that this will be the final extension for FHFA's participation in HAMP and he anticipates that this will be the final extension for HARP, adding that neither program was intended to be permanent.