The past few years have been rough economically. The government has tried with varying success to help those homeowners with their mortgage challenges. Most programs (and rightfully so) address those that need help saving their homes from foreclosure due to job loss, family emergencies, and overall economic hardships. These are well intentioned programs but sometimes have missed the mark in execution by the big banks. The remedy is mainly done via loan modifications which is a temporary solution at best with some unintended consequences along the lines of the participants overall credit. Other fixes include the typical bank risk mitigation tools of forbearance, deed in lieu, and claiming bankruptcy. Suffice it to say there are more than a few programs to address this need. But what about “responsible” or should I say – those mortgage holders still able to make their payments currently? Well, there is finally a program designed with those in the “great silent majority” in mind.
Mortgage Relief The Home Affordable Refinance Program (HARP) is sponsored by the Federal National Mortgage Association or commonly known as Fannie Mae and the Federal Home Loan Mortgage Corporation or Freddie Mac. It was passed by Congress in 2009 as part of President Obama’s Economic Stimulus Program. The irony here besides noting that Congress passed something worthwhile is that this part of the “stimulus” program does not cost the taxpayer. It has actually done three very beneficial things. First it helped to stabilize mortgages for those locked out of refinancing because of their reduced home values that may have walked away or at least gone delinquent quicker due to the higher existing payment, second it generated fees to help Fannie Mae and Freddie Mae, and third it increased the homeowners monthly cash flow by an average of $300.00 per month!
Here’s a real world actual example: On a Fannie Mae backed Second Home (Investment Properties work too) that had a Loan to Value (LTV) of 127%. Saved $468 per month with no appraisal. Another transferred from an interest only loan to a fixed rate fully amortizing and raised their payment by only $17, now money is going towards principle. A Freddie Mac SFR at 107% LTV saved $377/month with a debt ratio of 87%!
The rules of the HARP program are pretty straight forward. You have to be on time with your payments and your loan must have been purchased by Fannie Mae or Freddie Mac before June of 2009. It is not usually common knowledge to know who backs your loan because Fannie and Freddie do not lend to the public, but rather to banks. You can find out by asking your servicer (where you send your payments) or directly on their respective websites. Sometimes it is listed on your credit report mortgage trade line. We operate a HARP Loan Help Desk and can check for you as well as answer any questions. If you have made your payments on time for at least 12-24 months (you can have one 30 day late under some circumstances) and your home value has dropped below 80% or more – you need to take advantage of this program. HARP 2.0 expires at the end of December 2013. Rates are very good now and the government is still currently buying T-bills to artificially keep rates low. There is talk of HARP 3.0 in committee, but nothing has passed yet so now is the time to look at the Home Affordable Refinance Program.