Homeowner Affordability and Stability Plan (HASP) Definition
The Homeowner Affordability and Stability Plan or HASP is a program that was introduced in 2009 by then President Barack Obama as an effort to bring stability to the U.S. economy by preventing foreclosures on mortgages. Funded primarily by the Housing and Economic Recovery Act, the HASP was intended to aid millions of U.S. homeowners. It has three principal objectives:
1. Providing refinancing options for homeowners who are in stable financial situations,
2. Monetary support for financially unsound homeowners, and
3. Aid for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
A Little More on What is the Homeowner Affordability and Stability Plan
The HASP was introduced as a measure to avert mortgage foreclosures to keep a check on declining property value. The objective was to support those homeowners that had mortgages exceeding the values of their respective properties. HASP provides relief up to a maximum of $6,000 to affected homeowners.
The Homeowner Affordability and Stability Plan and the Great Recession
The Great Recession that began in 2007 as a result of a worldwide collapse of the economy brought with it severe repercussions – millions were rendered jobless and consequently, homeless. A bout of foreclosures and defaults obliterated the housing market. Severely inflating home prices, loose credit options and unabated handouts of subprime mortgages combined to bring forth a severely unstable economic status quo in the country.
The Great Recession caused an abrupt bursting of the housing bubble that so flourished during the late 20th and early 21st centuries. This brought in severe depreciation in the value of financial securities linked to subprime mortgages as well as other hypothecations. The cascading effect of such depression was immense – several banks and financial institutions across the world failed and several others were pushed to near failure.
The sudden drop in property value had a devastating consequence on homeowners who saw their home mortgages abruptly exceeding the net worth of their homes. Suddenly, defaulting on mortgage payments seemed more rewarding than paying for homes that had severely diminished in value.
Other Federal Activities throughout the Housing Crisis
Aside from the HASP, the U.S. administration undertook numerous measures to keep a check on its domestic housing market. A notable measure was the introduction of the Foreclosure Prevention Act in 2008, which sought to assist those homeowners that were threatened by imminent foreclosure on their mortgages. The Homeowner Affordability and Stability Plan and the Foreclosure Prevention Act together proved to be effective tools for stabilizing the housing market during such an extreme economic crisis.
References for Homeowner Affordability and Stability Plan
Homeowner affordability and stability plan (HASP)
Federal Mortgage Modification and Foreclosure Prevention Efforts, Pinedo, A. T., & Baumgardner, A. M. (2009). UCC LJ, 41, 319.
Means-tested Mortgage Modification: Homes Saved or Income Destroyed?, Mulligan, C. B. (2009). National Bureau of Economic Research. This paper uses the theories of price discrimination and optimal taxation to investigate effects of underwater mortgages on foreclosures and the incentives to earn income, and the degree to which those effects are shaped by public policy. The paper also considers the consequences of a public policy that left mortgage modification to lenders, subject to a requirement that modification would not be conditioned on borrower income.
Tackling the” end of the beginning” of the nation’s mortgage crisis, Cocheo, S. (2009). American Bankers Association. ABA Banking Journal, 101(5), 5.
Foreclosures, enforcement, and collections under the federal mortgage modification guidelines, Mulligan, C. B. (2010). National Bureau of Economic Research. This paper shows how federal mortgage modification initiatives discourage principal reductions in favor of interest reductions. Using the framework of optimal income taxation, this paper shows how alternative means-tested modification rules would simultaneously improve collections, efficiency, the number of foreclosures, and their total cost. As a result, lenders have an incentive to foreclose on borrowers deemed modification eligible by the federal programs.
Preserving homeownership: Foreclosure prevention initiatives, Jones, K. (2009, August Congressional Research Service, Library of Congress. This report describes the consequences of foreclosure on homeowners; outlines recent foreclosure prevention initiatives, largely focusing on initiatives implemented by the federal government; and discusses the challenges associated with foreclosure prevention.
A Borrower’s Equitable Relief Pursuant to the Consumer Financial Protection Bureau’s Federal Regulations, Silvestri, F. (2016). U. Tol. L. Rev., 48, 613.
The Trillion Dollar Problem of Underwater Homeowners: Avoiding a New Surge of Foreclosures by Encouraging Principal-Reducing Loan Modifications, Crespi, G. S. (2011). Santa Clara L. Rev., 51, 153. This paper explores different underwater homeowners whose mortgage obligations outweigh the current values of their houses. The paper uses a well-known data set to show that most of these homeowners continue to pay their mortgage dues, even while defaulting is a much better option for them. This paper proposes the implementation of a public education program designed to assist underwater homeowners in assessing where their interests lie, and then to encourage them to demand loan modifications, upon pain of default, when this proves to be their best course of action.
Reconciling Policy Initiatives, MAURICE, D. R., & YAN, C. Reconciling Policy Initiatives.
The End of the Home Affordable Modification Program and the Start of a New Problem, Whelan, C. K. (2017). The End of the Home Affordable Modification Program and the Start of a New Problem. Brook. L. Rev., 83, 1469. This paper examines the Home Affordable Modification Program (HAMP), focusing on the years of litigation that shaped HAMP, giving life to a program that was built on a foundation ready to crack. This note proposes a solution founded in five core principles: efficiency, affordability, accessibility, accountability, and enforceability. It further recommends utilizing the remaining funds of the since expired HAMP to revamp the program, focusing on each principle both individually and collectively, to ultimately assist the homeowners that are still rearing from the mortgage crisis.
The US Mortgage Crisis, Mehtabdin, K., Luttrell, M. T., O’Brien, M., Palermo, D., & Kochian, A. (2012). The US Mortgage Crisis. Chinese Business Review, 11(5).
Crisis and the Public–Private Divide in Property, Dyal-Chand, R., & Davidson, N. M. (2016). Crisis and the Public–Private Divide in Property. In The Public Nature of Private Property (pp. 79-102). Routledge.
Resolving the foreclosure crisis: Modification of mortgages in bankruptcy, Levitin, A. J. (2009). Resolving the foreclosure crisis: Modification of mortgages in bankruptcy. Wis. L. Rev., 565. This article empirically tests the economic assumption underlying the policy against bankruptcy modification of home-mortgage debt—that protecting lenders from losses in bankruptcy encourages them to lend more and at lower rates, and thus encourages homeownership. In light of market neutrality, the article argues that permitting modification of home mortgages in bankruptcy presents the best solution to the foreclosure crisis. The article shows that as the foreclosure crisis deepens, bankruptcy modification presents the best and least invasive method of stabilizing the housing market.