There’s been a lot of chatter about Obama’s administrations Making Home Affordable Program.  This program announced in March of 2009 has two components to it:  1) the Home Affordable Refinance Program or HARP for short and 2) the Home Affordable Modification Program also known as the HAMP program.

The primary objective of the Making Home Affordable Program is to help stabilize housing prices.  By helping you to stay in your home that puts one less foreclosure on the marketplace that ends up selling at a lower than market price – which in turn helps to stabilize the value of everyone else’s home around you.   The government believes that by helping to stabilize the housing market and help to keep people in their homes it will help to stabilize the broader economy.

The HARP program (Home Affordable Refinance Program) is designed for mortgages owned by Freddie Mac and Fannie Mae in which the homeowner can afford their monthly payments but is unable to refinance because they currently owe more than their home is worth.  Under this program Fannie Mae and Freddie Mac will allow them to refinance up to 105% of the value of their home at today’s market interest rate.  In order to qualify for this program you must have a satisfactory credit rating.

Regarding the HAMP program (Home Affordable Modification Program) – this program is designed to help people who are in foreclosure or going to be in foreclosure to keep their homes.  This program is designed to assist people who have suffered some sort of financial hardship due to a reduction in income such as the loss of a job for your spouse or experienced an increase in the mortgage payment as in the case of an adjustable rate mortgage that adjusted up.  The household must still have income however credit is not a factor.

Under the guidelines of the HAMP program your interest rate can be lowered to as low as 2% for up to 5 years, the bank may also extend the repayment term up to 40 years, and a portion of the principle balance of your loan may be placed on forbearance –  A big word meaning its still hanging out there but you don’t have to pay interest on it for a certain period of time.  If you sell your home – you’ll still have to pay that money back.  All of these factors are designed to get your mortgage payment down to 31% of your gross household income.

For participating lenders in the HAMP program the Federal Government has sweetened the pot by giving them an incentive to modify an applicant’s loan.  For each of the first five years of the modification the Feds will pay your lender a certain amount per month for accepting the modification.  In addition, as a homeowner, if you make your new modified payment on time you may be eligible for $1,000 in principle reduction for every year you make your payments on time – up to 5 years.

It is up to your particular lender to determine how they want to modify your loan – they don’t always have your best interests at heart so be careful.  If you feel the new terms they are offering you are going to put you in a worse situation down the road you do have options.  You should consult your attorney or a reputable company that regularly deals in loan modification such as SureFast Loan Modification.com.   These competent professionals can help to make sure you get the best deal possible and don’t get taken advantage of by your bank.