Thanks to some changes to the federal Home Affordable Refinance Program (HARP), more homeowners can qualify for government-endorsed refinancing. Previously, the program only offered refinancing options for households where the mortgage value was up to 97% through 125% of the home’s market value. This did help families who have become underwater, having more left to pay on their loans than their houses are worth. Given the continued depressed real estate market in much of the country, this hasn’t been enough. HARP 2, the expanded program, will allow a family who owes more than 125% of its home’s value to qualify for refinancing.
This program is different than the Home Affordable Modification Program (HAMP), which encourages lenders to change loans to restructure monthly payments. Each program has different requirements for qualification.
Many people are in financial trouble due to the combined effects of unemployment, increasing expenses, and accepting a mortgage that carried too much risk for a family. Some are ready to walk away from the house and the mortgage, accepting the consequences such as destroyed credit. Others want to take every option available to stay in the house and pay the mortgage in some form. Programs like HARP can now reach more people who want to keep their homes.
In order to qualify, the mortgage must be owned by Fannie Mae or Freddie Mac, the mortgage must have originated on or before May 31, 2009, you must be current with your mortgage payments, you must have had no more than one late payment in the last year, and your loan most be at least 80% of the value of the house.
In the past two years, fewer than 450,000 homeowners have taken advantage of HARP each year. With this adjustment to allow households deeper underwater to qualify, the number of families taking advantage of the program could increase to one million in each of the next two years.
HARP and HAMP are sponsored by the Department of the Treasury and the Department of Housing and Urban Development. The programs come from generally good policies designed to help homeowners when mortgage lenders have been more apt to take advantage of consumers. Just this weekend, I spoke with a firmer loan officer who left the business due to the shady ethics in the industry; her large corporation was issuing mortgages with the full knowledge that the borrowers would eventually default. There’s more to the story — the bank was selling the mortgages, so they had no inclination to worry about what would happen to the borrower in the future, and the government was subsidizing and encouraging risky mortgages, and every lender was taking advantage of this “free” money.
Nevertheless, HARP and HAMP can help correct these problems from a systemic perspective as well as a homeowner’s perspective.
Would you take advantage of the new and improved Home Affordable Modification Program?
Published or updated December 18, 2011.