Real Estate Marketing & Beyond
It doesn't matter that the Obama Administration recently enhanced leading government programs to bail out more underwater homeowners and save others from foreclosure. Most consumers don't even know these programs exist.
Life saver? Who knows?
Nearly 73 percent of a group of Americans said they'd never heard of the two primary programs in the Obama Administration's Making Home Affordable initiative - the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) - according to a survey by Survey Sampling International.
Recently updated to help additional millions of homeowners, the federal programs help make housing more affordable through mortgage modifications and special refinanced home loans, in both cases to bring down the cost of housing and help avoid foreclosure.
The study also found a large majority of those surveyed, more than 62 percent, unaware of new government programs that make home buying more affordable.
Since the housing crash, to make home buying more affordable, the federal government has cranked out a host of programs.
The Federal Housing Finance Administration (FHFA), the Federal Housing Administration (FHA), the Office of Veterans Affairs (VA), and even the U.S. Department of Agriculture's (USDA) Rural Development program have all offered new or updated affordable home buying programs.
Rob Wyse, the spokesman for FreeScore.Com, which commissioned the survey, said the results could have been different if all those polled were homeowners or home buyers.
Wyse said the home ownership status of those surveyed is not known. Home ownership status was not a qualifying factor for the 300 Americans polled. Aged 18 to 65, they were randomly selected after they opted in to sit on the panel.
"If I did this study again, the first question I'd ask is 'Are you in the market for a home.' It's like buying a car. You aren't really aware of what's in a car unless you are ready to buy a car," Wyse said.
"A lot of people go shopping for homes and they don't know their credit scores," he added.
What is 'HAMP,' 'HARP?'
• Available through Dec. 31, 2013, HAMP offers mortgage modifications for qualified homeowners with first and second mortgages and for qualified investors.
A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches.
• Also available through 2013, HARP allows qualifying homeowners to refinance Fannie Mae or Freddie Mac home loans to lower rates even if they owe more than the home is worth.
A refinance trades in an old mortgage for a new one and that can be a good deal with today's lower rates. CoreLogic estimates more than 22 percent of homeowners nationwide are "underwater" owing more than their property is worth due, in part, to fast declining real estate values during the crash and buyers who over-leveraged their home buying deal before the crash.
HAMP, HARP under-exposed, poorly deployed
Barbara Lymberis, president of the Santa Clara County (CA) Association of Realtors (SCCAOR), isn't so sure survey numbers are that far off.
Some critics of the post-crash government housing programs is that they weren't sufficiently publicized.
"There has not been enough intent or effort to 'get the word out' in clear, simple, effective communications, either on the part of the government or on the part of the lending institutions," said Lymberis, with the Perfect Harmony Properties Team at Keller Williams in Campbell, CA.
Others complain the programs' are voluntary, giving lenders little incentive. Recent updates are designed to change that, but Mark Hicks, broker/owner of the Seabrooke Group in San Jose, CA isn't convinced.
"If you asked a real estate agent what HAMP is they will tell you it's a place where you got dropped into a black hole until they foreclose on your property. It is filled with flaws the main one being that the banks do not want to help the people no matter what," said Hicks.
He added, "The HARP program has so many caveats that this is the one that is the main issue for owners of underwater homes. The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months. If they could afford the payments would they be behind?"
Early this month, President Obama announced a lower-cost Federal Housing Administration Streamlined Refinancing Program for certain qualifying homeowners with existing Federal Housing Administration (FHA) loans.
Mortgage insurance for the new FHA loan have been substantially reduced.
In addition, the new lender is not required to verify the homeowner’s income, employment or credit score. That could be risky for the market. Remember the impact of “no-doc” or “NINJA” (no income, no job or assets) loans?
Also, with no appraisal required, the homeowner can be underwater — owing more than the home is worth. Again, another potential problem. During the boom, borrowers often signed for more mortgage than they could afford and went bust.
Homeowners who are underwater in their mortgages may be able to refinance at today's low interest rates without having to appraise out thanks to new rules see your refinance rate at "Official Refinance"