The HARP loan refinance program, which was supposed to have aided four to five million home owners with a streamlined refinance of their existing mortgage has been a dismal failure.
The HARP (Home Affordable Refinance Program) program was designed to help those with loans owned by either Fannie Mae or Freddie Mac, but underwater, refinance their mortgages to lower prevailing mortgage rates. The program was rolled out in April 2009 with lots of anticipation that this program would free up cash for those home owners and help the economic recovery.
The guidelines, that this program was only for those whose loans were owned by either Fannie or Freddie (and therefore were presumed to be the strongest borrowers) were initially rolled out with a lot of pomp as a fix for homes that were losing value. The problem, as with so many government rolled out programs, is that participation by lenders was voluntary, and that lenders had autonomy in how the guidelines were interpreted, and which guidelines they could follow, and which they could ignore.
The end result is that only 116,677 loans, as of September 30, 2009, have been modified. The problem has not been a lack of interest by home owners, but a lack of interest by lenders. As originally rolled out, lenders were able to refinance loans up to 105% underwater on the first mortgage, regardless of the amount of a second mortgage.
As home values continued to fall, during the summer, the ratio underwater was raised to 125%, but almost no lenders permitted the increased ratio. And, in fact, lenders found almost any reason under the sun to decline these loans.
As originally rolled out, any borrowers with private mortgage insurance were excluded from these loans, but that provision was also changed later in the year. Still, lenders continued to decline doing these refinance transactions unless a private mortgage insurer could be found to re-insure the new mortgages. With private mortgage insurers in deep financial trouble due to the very high number of claims, there were no insurers willing to take on the risk. So those home owners have been blocked out of this program. Banks have also declined loans where there was no mortgage insurance but a second mortgage existed.
It cannot be overlooked that Fannie/Freddie owned loans that were supposed to qualify for this program were defined by guidelines prior to 2009. So homeowners with loans of more than conforming limits of $417,000 were also blocked from this program, regardless of credit scores, equity, or payment history.
There are currently no talks about revising this program. The calls continue to come into lenders from borrowers looking to qualify for HARP, but this program has almost died as home values have dropped below the 125% level too.
Most home owners have given up on the idea of ever qualifying for a HARP loan, and instead are trying to pursue loan modifications. As stated in many other articles, this is another almost impossible quest. Banks are not modifying loans either, if they can avoid it, in spite of a lot of pressure from the administration.
President Obama has called the bankers to Capital Hill again tomorrow (12/14/2009) to discuss how to free up the flow of credit to home owners and put a bottom under the housing values and foreclosure rate.
The results of that meeting, once announced will be reported here.
You might also want to read:
Advantages of the HARP refinance program
Is Fannie trying to sabotage the housing recovery? Read about tougher lending guidelines
Mortgage lending requirements are tightening again!
Obama summons big banks for another meeting on credit for home owners and businesses
Comments
Your article implies that MI companies did not support the HARP effort. MI companies offered HARP programs within days of the GSE announcements and still are very supportive of HARP. Please check you facts in the future before you disparage the MI industry.
MI employee, you are wrong. I had struggled for HARP program since it was launched by gov...but due to my current lender, Provident funding (keep telling they will but finally they are not), I still pay high rate without any hope to get onto this program...
MI employee, you need check before speak up, the above is real fact!
To MI employee
Can you tell me how many HARP loans you have written MI insurance for? Were these borrowers who had MI insurance on their original loan?
I have been in the mortgage industry for years, and have not yet found a lender willing to do those loans - for the reason I stated in the article.
I hear rumors that different lenders are offering the program, but when I check with the lenders, they tell me they would like to, but are unable to do so at this time.
Which MI lender are you with? Which lenders are you working with?
I would love to be able to report to the readers that this program is in fact working. But how do you account for the fact that 4-5 million people were supposed to have qualified and in fact, less than 120,000 of these loans have actually closed?
Why won't the banks/servicers work with more homeowners? They are making money hand over fist on the backs of homeowners by foreclosing. For these pooled loans, Mortgage Insurance was taken out on 62% of the pooled properties without required legal disclosure (PMI Insurer would provide insurance coverage, down to 60% of the value of the related mortgaged property.) In depressed areas, the Banks are happy to get the insurance money and walk away. The media hasn't even scratched the surface with the illegal PMI and TILA violations. Loans with Mortgage Insurance (PMI) would be above board if the homeowner was told that they were paying for this through a higher interest rate and if it was stated on the HUD-1 as required by law, but in most cases, it is not. And to this add the undisclosed yield spread premium on all the other undisclosed Monthly fees to the Master Servicer, Trustee, PMI Insurer, NIMS Bond Insurance and the SWAP provider, - it's no wonder we will have 475,000 notices of de
shelby, thanks for your reporting and updates. Why we don't hear much about any plans to address 2nd loan with HAPR? One of the reasons for dismal failure is most homeowners have a 2nd mortgage that could be as troubling, if not more than, their first. I recently read some one testified to the House to this fact (Dec 2009) but you don't hear much about it. If HARP could refinance 2nd along with the 1st there would be many more people who could benefit. It also eliminates another lengthy process and the headache of trying to get 2nd bank to subordinate.
To DK from LA - The HARP program was never meant to address second mortgages. It always specifically said that it was to refi Fannie or Freddie owned loans, and 2nd mortgages were not owned by either Fannie or Freddie. I've heard of so few successes with HARP that I really can't address whether or not 2nd mortgage holders were willing to subordinate, but I don't see any reason why they wouldn't. They were in 2nd position to begin with, so subordinating wouldn't change that. The issues with HARP began almost immediately when the lenders imposed all the rate adjustments that made the refinances not worth the cost. And, of course, the very high percentage of those with mortgage insurance that were never allowed to refi.
It is sad to see how many of the government programs have, for the most part, failed to help the majority of those who were supposed to have benefitted. The problem isn't the programs - in my opinion, it is the lenders and servicers.
Shelby, Here it is 11 months later and your article is as if it was written yesterday. I was told by Citi that my refi would not qualify under the HARP program but they couldn't tell me why (DU spit out no ref code). I have 800+ scores low LTV, 0x30 on the mortgage and my loan was purchased by Fannie some time ago. I have been out of work for 3 years but have always made my payment. Im looking to do a rate and term with no cash out and would save me 100bp or $755 monthly. Im not done yet fighting these guys but its going to be a long cold winter fighting and waiting in phone hell to get this transaction down.
This week Bank of America turned down our plea for a loan restructuring. I lost my job a year ago, and to my total amazement, have not been able to get another. We tried to refi for a lower rate, but my lack of job disqualified us.
After waiting patiently and struggling to make our mortgage payments since the beginning of November for BOA to get back to us as to whether or not our application was accepted, we just found out it's been denied. The reasons? BOA told us that our mortgage investor, Fannie Mae, has only three guidelines that will allow them to approve a loan restructuring: DEATH, DISABILITY OR DIVORCE! If we had been informed of this in the first place, we never would have tried for this and waited for months with agonizing anticipation!
BOA is a greedy jerk and the government doesn't seem to care either that even though my husband and I have been responsible consumers, always paying down every bill on time for decades, and now through no fault of my own, I was part of a layoff and cannot get another job, and all we're asking is to have lower monthly payment so we can continue to be good citizens and keep living life, none of that matters at all to them!
Death, disability and divorce - really? Is this what we have to make happen in order to get any help? Is this what the government wants? For all us to just go away and die?
I understood that the HARP program provided funds for closing costs, but I talked to Chase today and they said that's not correct. I can get 4.3% with $2500 closing costs or 4.7% with no closing costs. Is this correct?
I attempted to refinance with Wells Fargo (WFHM) in 2010, but I was not told about HARP when I initially inquired although I specifically asked about the streamlined programs. When my appraisal came back at about 110% LTV, I was denied the traditional refinance. When I later tried to take advantage of HARP, the recent appraisal had to be used according to WFHM policy and the interest rate they offered was about one percent higher than the existing rates at that time. That appraisal which would not have otherwise been required under HARP has prevented me from being able to refinance. I filed a complaint with the BBB but it seems that WFHM has successfully prevented another customer from getting HARP.
Sylvia said
"I understood that the HARP program provided funds for closing costs, but I talked to Chase today and they said that's not correct. I can get 4.3% with $2500 closing costs or 4.7% with no closing costs. Is this correct?"
I close tomorrow on my HARP refinance of my primary mortgage. I have a second mortgage too. All together LTV is about 101% using the home current value as stated by Freddie Mac. The first mortgage LTV is about 65%. I got 4.875% and am paying closing costs totaling around $5k which I get back in about 13 months with the savings from the lower rate; These costs are an amalgam of the usual fees, taxes, title fee, etc. As far as I can tell, HARP does not pay for anything. Surely there is some kind of behind the scenes benefit to the lender for making a loan like this for HARP, but, other than the artificially low interest rates, I did pay the fees myself.
On another note:
Obtaining a second mortgage is, without a doubt, the dumbest thing I have ever done. Don't do it and especially never, ever get cash out of your house while you own it - the dirty little secret is you are penalized during later refinancing. The continuing recession is providing superb training in real personal finance... for those who listen to its lessons.
An update to the previous post.
The lender is Chase which is the same as Sylvia's lender.
The origination fee component of the closing costs are about $1k. Title fee another $1k. The bulk of the rest are escrow establishment and state transfer taxes.
Got something to say?
Examiner.com is looking for writers, photographers, and videographers to join the fastest growing group of local insiders. If you are interested in growing your online rep apply to be an Examiner today!