Homeowner Affordability and Stability Plan - Explained
What is a Homeowner Affordability and Stability Plan?
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What is a Homeowner Affordability and Stability Plan (HASP)?
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).
How Does the Homeowner Affordability and Stability Plan Work?
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.
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