By Jeanne Roberts
There is good news on the homefront for underwater homeowners whose mortgages amount to more than their home’s value, and it’s called the Home Affordable Refinance Program, or HARP. But questions are being raised regarding the real number of homeowners who will receive help through the program.
Underwater mortgages occurred when rapidly rising home values during the first half of the decade – or “housing bubble” – reached inherent limits, given the tenuous nature of certain financial instruments in the real estate and financial markets.
When the bubble burst it caused a far-reaching series of reactions that deflated those same home values. This left some homeowners with a $150,000 house, for example, but a $250,000 mortgage. Many economists say the recession is over, but neither the jobs nor housing markets have recovered. In fact, some economists insist, they may never recover their former robustness.
HARP was introduced in 2009 by President Barack Obama to help these underwater mortgage holders and is being expanded to include homeowners who are unable to qualify for refinancing under conventional guidelines.
It was originally aimed at a housing market that comprised an estimated 5 million struggling homeowners. Unfortunately, HARP’s original terms and limits so annoyed and depressed mortgage holders that the program, to date, has reached fewer than 900,000 mortgage holders.
These limits included complex requirements, high risk-based fees, and a restriction that eliminated any homeowner whose existing mortgage represented more 125% of the loan-to-value of their home.
The revamping of HARP will let borrowers whose mortgages are backed by Fannie Mae and Freddie Mac refinance those underwater mortgages, presumably no matter how far their home’s value has fallen. In fact, current loan-to-value ratio on the existing mortgage must be greater than 80 percent.
And, mortgage holders can’t double-dip; that is, if they already have an earlier HARP loan, they can’t get another at the even better rate of 4%. The new terms also eliminate the need for yet another property appraisal in calculating LTV, and the program’s end date has been extended.
The plan, announced last week still has certain eligibility limits. For example, your mortgage has to be a Fannie Mae or Freddie Mac instrument, owned or guaranteed by one agency or the other, and you must not have missed any payments in the last six months (since April 24, at present), or have more than one missed payment over the last year.
The FHFA, or Federal Housing Finance Agency, which currently controls Fannie, Freddie, and 12 other Federal Home Loan Banks – located in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle and Topeka – is expected to announce the final program parameters by November 15.