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Homestart Explains Obama's Bank Loan Modification Plan | Part 1 Introduction

Introduction. As part of Obama's 2009 economic recovery package, the President has introduced a plan to rescue and revive the troubled housing market. The new plan is called the Homeowner Affordability and Stability Plan (HASP), which describes Obama's intents to modify distressed mortgages, keeping struggling borrowers in their homes with the intent to help stop rapidly declining property values resulting from surrounding homes entering foreclosure. Obama is dedicating $75 billion to the HASP and below are some key details.

HASP focuses on reducing mortgage payments since it argues homeowners will continue to stay in their homes, despite declining home values, as long as the borrower is able to afford their monthly mortgage payments during the poor economic climate. Many economists agree that foreclosures result from homeowners simply being unable to afford high monthly mortgage payments versus not being able to pay at all. Obama's plan requires major lenders and banks to participate in reducing monthly mortgage payments to less than 40% of the borrower's gross monthly income. The resulting losses lenders and banks incur would be refunded by Obama's $75 billion HASP budget.