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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
Pam
August 09, 2010 at 11:15 am

I have been trying to get a HARP or HAMP since April due to hardship. We own our own business which reflects the construction industry and Ocwen keeps telling me I don't qualify because I am not in default on my loan. I also don't qualify for an inhouse modification for the same reason. My home value might be 480,00 now my first mortgage is at 237,000 with a home equity line out at 100,000 which totals 337,000. So, I still have plenty of equity like 30%. If anyone has any suggestions- I live in Illinois so I have conctacted Senator Durbin, Halvorsen,and Burris and the Springfield Urban League. This is very frustrating- any suggestions I sure would appreciate it!!!!

Bob
August 07, 2010 at 3:13 pm

For those saying that the mortages were bundeled and sold to investors and thats why they can't be refi'd, that is incorrect. You are paying off one mortage, and taking out another. Unless you have a penalty for taking out a mortgage, you won't have any issues.

The banks also shouldn't care because they are just the servicer for the sold loan. The banks should be glad to do it because they get money from the government, on top of all the closing costs that they will charge you, and then they will just take the loan and sell it to investors again, so the banks may get more money by allowing you to refi.

The secret is to keep calling, and calling until you get someone who knows what they are doing. Don't give up.

Mom
August 06, 2010 at 12:54 pm

The banks don't want to take a hit to their bottom lines? Well, jeez, this is how capitalism works guys. While you're busy worrying about "socialism," capitalism is going to eat your lunch. I like a capitalistic system. I'm just more realistic I guess.

No JIM, the Democrats didn't force banks to make mortgages to bad risk people. There are MANY bad players in this game, but before blaming the government you need to blame the criminal acts of mortgage brokers. Most banks that loaned to people were not even CRA banks. Sheesh. Please get educated.

Patrick
August 05, 2010 at 9:30 pm

After months of runarounds and smoke screen tactics by Wells Fargo they said I am now eligible for a HARP refi.. previously I was told that despite Fannie/Freddie holding my loan, the investor wasn't interested in losing premium. Now they say I am eligible, but at 5.25% with almost $7000 in closing costs. LOL. My wife and I have PERFECT credit, no debt, and the same jobs for the last 6 years and the house is valued at 330K with only a 1st mortgage balance of 320K. Unbelievable.. I understand their position.. why refinance me and lose 1.5% premium. HARP is a sham and a disgrace to all of the responsible homeowners.

Jo
August 05, 2010 at 11:48 am

Funny for those of us that are NOT late on our mortgage, still have a little equity but a high mortgage rate, we can't get refinanced either. So...for me? geez it appears if I stopped making my mortage payment I may be able to get a refi. I called the HARP line, was transferred several times, they don't seem to know what they are doing...and finally just ended up calling my mortgage company (yet again) and asked that they consider the refi. I may have a chance since I'm not upside down in my loan...however due to the downturn in the market, I've only got about 3,000.00 equity, which is a hell of a lot less than the down payment I put down 4 years ago.

Messi
August 05, 2010 at 7:54 am

The loans are not being modified with HARP because these were the mortgages that got bundled and securitized and the securities then sold to investors.The shear logistics of getting the approval from hundreds of thousands of investors for each loan to be modified doomed this program from the start.
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Dan
August 04, 2010 at 11:56 am

HARP is a joke. We had no crystal ball, and had no idea that our home value would plummet and keep us from refinancing. BOFA has our loan and has no incentive to refinance us, as they can make 3% more interest over the life of the loan than the 4.xx rates. Banks just want their money and can care less about the economy and who gave them money. The Government needs to follow through on allowing 125% FHA refinances...that's what they should have done from the start! We have an over 800 credit score, and now we're stuck because HARP has been more about PR than actually helping anyone.

Waylan Cooper
August 04, 2010 at 11:34 am

The loans are not being modified with HARP because these were the mortgages that got bundled and securitized and the securities then sold to investors. According to the securitization agreements, the servicers can't modify the loan without the investor’s approval. There are hundreds of thousands of investors for each loan packaged this way. The shear logistics of getting the approval from hundreds of thousands of investors for each loan to be modified doomed this program from the start.

Jim
August 04, 2010 at 11:18 am

Democrats created the mortgage meltdown by FORCING banks to make loans to people that could not qualify under previous guidelines. NOW these same genius politicians want to play hero by offering a solution. I don't think they really want people to get help - they just wanted to play the hero role. The PROOF is in the reality - they are doing virtually nothing to truly help people. Government, especially Democrats, are the problem. Don't expect the HARP situation to change.

Andy Boyum
August 03, 2010 at 12:44 pm

I should clarify a bit. I am a LO too, but being our loan has MI I can't broker it, obviously. I have done many HARP's for clients without MI and under 105%. But never over 105% and certainly not with MI. It's just frustrating for me that we can't get help because I didn't put 20% down. But I have been able to save clients hundreds per month on the program...so I guess it's not a complete joke. :)