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HARP, the forgotten stimulus

By Holden Lewis · Bankrate.com
Tuesday, August 3, 2010
Posted: 9 am ET

As I noted last week, the Home Affordable Refinance Program is a bust. And I've never succeeded in getting a straight answer as to why.

In comments from a post last week,  Andy Boyum writes: "HARP is a joke!" He says that, because his loan has mortgage insurance, he can refinance only with his current lender, Wells Fargo. He and his wife want to refinance at 125 percent of the current value, but the bank has turned him down because they have a maxed-out credit card.

"I think it's because the MI we already have isn't going to cover them because we bought at 100%, now asking for 125%," he adds. "That and the fact that they make more money on us at 6.75 then they will at 4.75. So are they daring us to stop making our payments?"

This is the gotcha moment. Because if the Boyums stop making their mortgage payments and seek a modification, the bank will audit their personal finances and conclude that they can afford the monthly payments, and they're strategically defaulting. They won't qualify for a modification, so the bank won't give them one.

They probably do qualify for a HARP refi, but what incentive do the bank and the mortgage insurer have to make that happen? The bank ends up collecting a lower interest rate, and the mortgage insurer ends up shouldering more risk. And for what? To give lower mortgage payments to someone who can afford the current monthly obligation?

The Obama administration and Congress have pushed servicers hard to approve more loan modifications, but they have exerted no pressure on lenders to approve more HARP refis. Yet HARP is the Making Home Affordable program that rewards the responsible. Every HARP refi stimulates the economy by reducing the borrower's monthly bills, freeing cash to be spent on other things.

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22 Comments
Julie
August 31, 2010 at 4:53 pm

Does anyone no where else I can turn to get refinanced under the making home affordable act? We are not underwater, have excellent credit, good income but home prices have fallen such that we don't have 80% loan to value. I have tried 4 different brokers even my current lender and they all tell me that my loan(which is a freddie Mac)is being rejected under the program and none can tell me why. One guessed that our loan was probably sold or bulked together with others or that it could be as simple as a name mispelling. Is there anyway to find out more info on this. We are the perfect canidates for this, have always made our payments on time but want to enjoy the benefits of a lower monthly payment. Any help would be appreciated.

Holden Lewis
August 14, 2010 at 9:52 pm

I'm sorry about your mother's and your troubles. I have an acquaintance whose father had Pick's disease, a form of dementia. It hit him in his 50s or 60s and it was tragic.

One thing I would suggest is to inquire about getting a reverse mortgage that would pay off the outstanding mortgage as well as possibly provide some income. I don't know if this is possible in her case, because she does have an outstanding mortgage, but it might be worth a shot.

Les
August 14, 2010 at 1:00 am

My mom took with alzheimer's and breast cancer. The alzheimer's came which caused a person who never missed a bill or wrote a bad check to give money to every scam and have over 30000 in overdraft fees. She was with the bank for 30 years and never wrote a bad check, but didn't think anything was wrong or let anyone know what was going on. I found out because they froze her assets from another scam lottery check she tried to deposit. Alzheimer's works in very strange ways. If you were to talk to my mom you would have no idea there was a problem. It was the mathematical/reasoning side of the brain that was affected first. The docs even told me I caught it faster than most other people do. I got her on amazing new medication that helped even reverse some of her symptoms and then took over her finances, bills etc, however, it was too late for her credit. Gratefully she was never late on her mortgage and never has been, but now that she needs to lower it (she is at 7% on a 30 year) she can't because her credit is destroyed from all the scammers stealing her money and the damage her memory/reasoning functions were doing. Everyone that meets my mom thinks she is fantastic and always did. Considering she has Alzheimer's she does remarkably now. It's more like senior moments. Then she took with breast cancer. She fought it and was the most loved patient at the cancer center. She did it with such humor and feistyness it was beyond inspirational. I during this whole time and for about a year tried to get a HARP from citibank for my mom. I did everything right called the numbers etc and they kept blowing me off and saying the appraisal wasn't done. Then they told me the appraisal was done and I should know soon. Then they tried to tell me it wasn't done again, but when I caught them in it they agreed it had been done. They were rude to me over and over again. All of a sudden when I stopped calling I got a call from loss mitigation stating my mom didn't qualify for HARP (they wouldn't tell me why) and that they needed a $100 application fee from me and they still wouldn't be able to tell me if she would qualify for their home loan modification. I left message after message for the loss mitigation person that called (it was always voicemail) asking why all of a sudden I needed to pay an application fee when it was never asked or mentioned before for over 6 months. She never called me back. To me this is a worse scam than the con men that scammed my mom to begin with. The people that are suppose to help and required to help by the US government want $100 from someone that doesn't have the money when they can't confirm they will qualify. Truly reprehensible. They also wanted me to roll all my mom's debt into the mortgage. I'm better off writing it off for an 82 year old woman plus the 2nd mortgage she pays less than if we were to roll it into the first mortgage thus it is all senseless. After calling 3 times a week for 10 months or so I finally gave up. I'm going to try again once I am finished with settling the income tax my mom owes, but it again seems worthless. My mom is worth so much than all of this and has been someone who has raised countless funding for charities etc and this is how it has ended up. I'm doing everything in my power even with being disabled myself, I just don't get how the people they need the most help are the ones that are not being given any help and are being more hurt. It's just really senseless to me. Can anyone tell me what I should do? Would it be worth trying to do the Harp and home loan modification again since we still haven't missed her payments even if her credit is so destroyed especially with her paying 7% on a 30 year with rolling what is left into it and is it worth $100 when they still could deny her? Thanks for listening!

Debra James
August 11, 2010 at 12:44 pm

I started the refinance process with B of A last week. I am seeking to refinance the remaining 27.5 years of my 30-year 4.875 fixed rate mortgage into a 15-year mortgage. I was offered a 4.25, no points mortgage; I'd pay the $3800 fees upfront (to me, it doesn't make sense to finance them). Under many circumstances that would sound quite appealing. However, there are a few things that have me leaning towards forfeiting my application fee and not going through with the re-finance. First, when I look at the rates that are listed on Bankrate, there are many offerings in the 3.75 to 4.0 range with no points; much more attractive than 4.25. Secondly, B of A uses an automated home appraisal system to come up with a market value of a home, per the recommendation of HARP. This amount may be lower than the allowable 125% underwater limit. So, if you have done a lot of renovations, you will have to get an appraisal to submit to the bank; an additional $475. Third, after using a mortgage calculator, I was able to see that if I paid the additional amount as if I had a 15-year mortgage, it would be paid off in 15 years, 11 months. The 11 months difference would result in about $25k more in payments, but I also would have the flexibility to pay the regular mortgage amount if I encountered a financial hardship. Lastly, there are some pundits who say not to pay off an affordable fixed rate mortgage, and save and invest any extra money. I will not go into what I think are the positives and negatives with this point of view. I'll just say that it does have some merits with me.

So, I know my situation is not the same as someone trying to re-finance an adjustable mortgage, but if you already have a fixed rate mortgage I suggest that you review all the pros and cons before pulling the trigger. I wish I had thought about it more beforehand, but I was easily seduced by the lower rate without doing more research, and now may be out $450 for my hastiness.

I would jump at re-financing if I had the option of shopping around for the best rate, but unless I am wrong, I have to stay with my current mortgage servicer to participate in HARP. If anyone knows otherwise, I'd truly appreciate the information.

Matt
August 11, 2010 at 12:00 am

Tina.....most lenders do not even allow you to go up to 125% on the HARP program if you are doing a 15 year term. Most will require you to do the 30 year term.

Gavin
August 10, 2010 at 1:41 pm

One thing that isn't mentioned. For northern Chicago burbs, I tried to refi only to find out that Citibank would only end up saving me $160 a month at +$9000 in refi fees that get rolled into the mortgage. GREAT, now I'm paying interest on the refi fees too.
It would take almost 5 years of paying my "savings" back into the loan just to cover the initial fees (without interest). What a deal?!
To top it off, this was only at 105% LTV.
Wonder what great deal I could get at 125%.

Holden Lewis
August 10, 2010 at 10:39 am

Tina, I'm guessing they're in the range of 4.25 to 4.75 percent, plus mortgage insurance premiums if applicable.

Tina
August 09, 2010 at 8:31 pm

What is the current HARP Refinance Rate for 15 year at 105% and at 125%...any answers..
Thanks
Tina

vini
August 09, 2010 at 2:26 pm

Mortgage Brokers can only sell what a Lender is willing to buy. Historically good underwriting guidelines were abandoned by Fannie & Freddie and many portfolio lenders. Credit Rating Agencies abandoned their principles, and the list of bad players goes on & on, including some Democrats and some Republicans. The Big Reason that many loans cannot get modified is that these "homeowners" never did and never will qualify for the loan. Same goes for these "small business owners" who should be Employees. Home and Business Ownership isn't for everyone! And Mortgage Banking and Securitization is not for thieves.