Banks are making a big pile of cash from HARP © Anatoly Maslennikov – Fotolia.com

According to a report in the Wall Street Journal, the country’s banks are expecting to accrue as much as $12 billion this year, simply by helping homeowners to refinance their mortgages through the Home Affordable Refinance Program.

HARP underwent some serious changes late last year, as the government strove to encourage more banks to agree to refinance the mortgages of homeowners who had slipped underwater. The idea was that homeowners would be able to take advantage of record low interest rates and benefit from a serious reduction in their monthly repayments.

However, while this has happened to an extent, homeowners often feel compelled to refinancing with their existing lender, as approaching another lender means there are dozens more hoops to jump through. Of course, many homeowners are reluctant to do so, and this is something banks are quick to take advantage of by offering much more expensive rates.

Shaun Donovan, Secretary of Housing and Urban Development, explained that the situation has led to  what he termed “essential a monopoly on refinancing”.

“Whoever holds their current loan, whoever is the servicer, they can charge them—and we’re seeing this—very high fees,” he added.

According to the WSJ report, some homeowners are being charged by their banks as much as 0.53 percentage points higher than the going rate on refinanced loans in their area. Compare this to the Federal Housing Alliance, which charges Fannie Mae mortgage holders just 0.1 percentage points to refinance, and we can see there is a huge discrepancy.

Unsurprisingly, the likes of Bank of America and Wells Fargo insist that their refinancing options are competitively priced – however this hasn’t stopped the Obama administration from pushing for an amendment to HARP that would allow borrowers to refinance with other lenders much more easily.

phanlop88 / FreeDigitalPhotos.net

Sen. Robert Menendez (D-NJ) and Sen. Barbara Boxer (D-CA) were scheduled to introduce legislation this week designed to remove barriers faced by refinancing homeowners with Fannie Mae and Freddie Mac loans.

The two legislators want to fast track the legislation to take advantage of today’s low interest rates.

The average interest rate on 30-year fixed rate mortgages (FRMs) hit another record low, 3.84 percent, the week ending May 3, according to Freddie Mac. During the same week, the average rate on the 15-year FRM was also a record low 3.07 percent.

The essence of the legislation already has President Obama’s support. This week, he gave Congress a “To Do” list that includes passing legislation that cuts the red tape in the mortgage market in order to expedite refinancing.

“I agree with President Obama’s ‘To Do” list to create jobs and strengthen our middle class” said Menendez. “That’s why I am introducing legislation this week to knock down barriers and help responsible homeowners refinance at lower rates. It will put thousands of dollars back in the pockets of hard working families and boost our economy. I look forward to moving this bill to our ‘done’ list quickly.”

Targeting shortcomings of HARP 2.0 (the enhanced version of the Home Affordable Refinance Program), the legislation, if passed into law, would:

• Extend streamlined refinancing for Fannie and Freddie borrowers.
• Eliminate all up-front fees on refinances.
• Eliminate appraisal costs for all borrowers.
• Require second lien holders who unreasonably block a refinance to pay restitution to taxpayers.
• Require mortgage insurers who unreasonably fail to transfer coverage to refinanced loans to pay restitution to taxpayers.
• Pay for itself. Reducing homeowners’ mortgage payments also reduces default rates and foreclosures, reducing Fannie’s and Freddie’s reliance on taxpayer bailouts.

After improvements six months ago designed to include millions of more homeowners, HARP 2.0 hasn’t been the resounding success supporters hoped it would be.

In it’s “Senior Loan Officer Opinion Survey on Bank Lending Practices” the Federal Reserve Board recently reported only 30 percent of senior loan officers from 58 domestic banks and 23 U.S. branches of foreign banks reported that they were actively soliciting HARP applications.

The officers cited mortgage insurance and second mortgage issues as top reasons many balked at doing HARP refinances. Strict underwriting standards, fraud, prohibitive costs for borrowers and conflicts between servicers have also gummed up the works.

“Under HARP, lenders looking to compete with a borrower’s existing servicer continue to face barriers to participating in the program, including stricter underwriting criteria and full representations and warranties,” Boxer wrote in a letter to Federal Housing Finance Agency (FHFA) acting director Edward DeMarco encouraging him to improve HARP further.

“As a result, many homeowners are being forced to refinance through their existing servicer, instead of being able to shop around for the best deal,” she added in a letter designed to garner quick support for additional upgrades to HARP.

HARP 2.0, available until Dec. 31, 2011, allows eligible homeowners with Fannie Mae or Freddie Mac mortgages to refinance to better terms and rates.

The borrower must have signed for the loan prior to June 1, 2009 and must be current on their mortgage payments with no late payments for the last six months, prior to applying. They also may have no more than one late payment in the last 12 months.

Homeowners can qualify no matter how far underwater they’ve become on their mortgage, that is, no matter how much more they owe on the mortgage balance than the home is worth.

The new legislation, if passed into law as it is, wouldn’t meet some of the goals rumored to be coming in the so-called HARP 3.0, including:

• Removing the Fannie Mae-, Freddie Mac-only barrier.
• Opening the program up to Ginnie Mae, Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) mortgages.
• Opening the program up to riskier subprime mortgages and “Alt-A” loans.
• Allowing cash-out, jumbo loan refinances and refinances for loans held by self-employed people.
• Including borrowers behind on their payments more than once in 12 months or borrowers with a single late payment in the last six months.

Mortgage News Daily’s Robert Chrisman said his sources told him “(HARP 3.0) will allow conforming loans to be refinanced through FHA regardless of LTV or note holder.”

Tax man to the rescue! © Scott Maxwell - Fotolia.com

Housing values in hard hit areas continue to erode, and millions of home owners are still threatened with foreclosure. Some housing analysts have termed it a “death spiral” in the housing market, as the loss of value leads to more defaults, and more defaults lead to more loss of value, etc., etc.

While the federal government has created HAMP, HARP, HARP2, TARP, HAFA, and perhaps a few others, many states also have created a litany of state funded payment assistance programs, such as “HomeSafe” in my home state, Georgia, that offers payment assistance to home owners who are behind on their mortgage payments.

As one who is intimately familiar with the fight to help home owners save their homes, I can tell you that the crux of the problem is not to blame mortgage servicers, or “deadbeat” borrowers, and it’s not even the fault of Ed DeMarco, the embattled head of FHFA, who is presently refusing to write down mortgage principal. I suspect that even if DeMarco does bow to political pressure, and agrees to some kind of plan to write down mortgage principal, it will not be the problem solver that everyone has made it out to be.

I’ve been doing foreclosure mitigation for individual borrowers for several years now. During that time I’ve seen first hand how ridiculously difficult it is to understand these programs and help borrowers find a program that is right for them.

In my opinion, based on personal experience working with mortgage companies to help borrowers avoid foreclosure, the primary reason why so few home owners have been able to get any kind of assistance is because no one can tell who qualifies for what program. 

These programs were created with a variety of qualifying criteria that must have been thought up by throwing darts at a list of potential criteria. And from a tracking standpoint, there is no single source for all of the data that must be verified to qualify a borrower for a particular program.

For example, a program may call for these guidelines for a loan modification or payment assistance:

1. Borrower’s current mortgage payment must be above the 31% threshold.
2. Loan to Value may not exceed 125%.
3. Borrower may not be more than 6 months behind on their mortgage payments.
4. The reason for borrower being in default must be due to loss of employment.

All of the programs instituted by federal and state agencies suffer from a severe lack of qualified users. While HARP expected to help perhaps 4 million borrowers avoid foreclosure, the actual number was less than 1 million. And it goes on with the rest of these programs. None of them were utilized at the level that was predicted for the program. Some have only reached 5 or 10% of the total that was originally predicted.

The government bureaucrats, who have no experience in real estate, make these rules, and then blame the servicers or some other agency when the goals are not met. But the real problem is the people making these silly, arbitrary rules.  

If your goal is to stop foreclosures from happening, what the heck difference does it make whether someone is 6 months behind or 12 months behind? And if people can’t make their payments due to the employment situation, what the heck difference does the 31% threshold make? Did the banks or AIG have to meet such silly, arbitrary rules for their bailout? I doubt it.

And as anyone in real estate knows, you have no way to track all of these requirements in an easy way. Public records can show you how much someone owes on their mortgage, who the lender is, and who the borrower is, but there are no public records for employment info, as in did you get behind because you were unemployed? or did you get behind because you bought a new Ferrari?

Expecting mortgage servicers or state agencies to sort out all of these qualifying requirements is simply not realistic. So borrowers seeking help are asked to submit reams of documents on all sorts of things, then those documents have to be sent to someone at the mortgage company or state agency who has to look at all of them and try to determine if that borrower meets the guidelines for a particular program.

It’s very difficult to do, and what if the borrower is lying? How can you expect the mortgage servicer or state agency to tell? This stuff is just too complicated. No one, not the borrower, not the mortgage servicer, or the state agency can readily determine who qualifies for what. So, while the borrower thinks that they have begun the process of saving their home, back at the mortgage company office in San Diego, California, the foreclosure has been filed, even as the modification office in Eagan, Minnesota attempts to determine who is qualified for what. So the right hand does not know what the left hand is doing. As a result, people get foreclosed on while believing that they are about to get a loan modification. It’s just plain crazy.

But when the government bureaucrats want to make sure something gets done, they call in the IRS to enforce it. Take the “Patient Protection And Affordable Care Act”, better known to most of us as “Obamacare”. This program is designed to require every man, woman and child in the USA to have health insurance. So how did they decide to enforce it? Call in the IRS. When it came to making sure that virtually everyone in the nation had met the program requirements, the government chose the IRS as the most efficient way to insure that everyone was “in compliance”.

Why not have the IRS handle the foreclosure crisis as well? When someone tries to get a mortgage they must submit a tax return. If a borrower wants to qualify for a loan modification, or verify income for the variety of foreclosure programs out there, they are often asked to submit a tax return. In fact, if you look, you’ll see that the only real improvement we’ve had in the housing market since the 2008 collapse, was not due to government intervention, HARP, TARP, HAMP, or HAFA, it was the buyer tax credit of 2009-2010. Once it expired, the housing market went back into it’s tailspin.

When the government really wants to ensure that everyone “qualifies” for a program, they tie it to the one government agency that is famous for it’s ability to track and confirm data. Why not give all borrowers a big tax credit equal to the difference between the amount they owe on their mortgage, and the current value of their property? Then, take that tax credit refund, and have the IRS send it directly to the mortgage company to make up those back payments. That would give all “underwater” borrowers a “principal reduction”, bring all delinquent borrowers who are “under-water” current on their mortgage, and effectively stop the housing crisis dead in it’s tracks. And the cost could be paid for with all that unspent money from HARP, HARP2, TARP, FHFA and any other related program.

And as for those borrowers who got behind because they were unemployed or underemployed, who but the IRS knows better when a borrower is really qualified for this status? Their income tax returns tell the tale, and shows the unemployment income or loss of income. No one but the IRS has such immediate access to this data. Since all home mortgages and tax returns are tied to the social security number for the borrower, it’s all there in one neat package. No more confusing programs with endless acronyms, no more trying to figure out who qualifies for what, and the IRS is already set up to deal with hundreds of millions of people, so they won’t be overburdened.

And while you are at it, bring back that buyer tax credit for all of the folks out there who still have money and credit, and give them a reason to start buying again. You’ll have the housing problem solved in about a year.
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Donna S. Robinson is a 16 year veteran of the real estate industry and a staff writer for Realty Biz News. She is a recognized expert on housing market issues and residential real estate investing.  You may join her email list on her website at www.RealtyBizConsulting.com

Obama's help comes at a cost... © iQoncept - Fotolia.com

Here’s the problem with this thinking: Government has no money of its own. The only way government has two (borrowed) nickels to rub together is by asking the rest of us to pay for the rescue. Guess what? All homeowners are impacted by President Obama’s grand rescue schemes. HAMP, HARP (and HARP2.0, among others) are all funded by taxpayers. Not only do we pay for these ill-advised housing rescue programs, we’re also on the hook for the bailouts offered to Fannie Mae and Freddie Mac, to the tune of $170 billion. When you add in the potential for even greater future losses – up to $7 trillion – it’s easy to see that the stakes couldn’t be higher.

Millions of homeowners have seen the values of their homes hit the basement. There’s no dispute about this. There’s also no dispute that millions of Americans either can’t find jobs or can’t find jobs that pay enough to support their families. But throwing good money after bad isn’t the solution.

I understand that the ultimate goal with all of these housing rescue programs is to stabilize the U.S. housing market (and maybe even win a few votes for the president’s reelection). But it’s simply not working.

Yes, it’s true that each of these ideas has a temporary stabilizing impact on the U.S. housing market. But each time government tries their latest, greatest “guaranteed fix”, it doesn’t take long for reality to hit our policymakers in the face: There are no easy fixes to this complicated problem.

Instead of artificially propping up the housing market with expensive schemes that do no more than give talking heads fodder for often boring debates, government needs to get out of the way and let the chips fall where they may. Make no mistake: this will be a painful process. People will lose their homes. Prices will fall in the short term. But we will recover.

There is something the Obama administration could do for the U.S. housing market that doesn’t involve spending phantom dollars and borrowing even more money. It could stop talking about how dedicated it is to helping deserving homeowners keep their homes while continuing to fine lenders for not foreclosing in a timely fashion. Call me crazy but this looks hypocritical.

Fixing the U.S. housing market is about more than pleasing certain taxpayers. It also includes making hard decisions. Like deciding that it’s patently unfair to favor the wants and needs of some homeowners over others, while asking all taxpayers to pay for these social experiments.

It’s time politics is unceremoniously kicked to the curb. As an Independent, I’m tired of government thinking it can solve problems for a few on the backs of the many. I don’t care if the money government wants to spend is designed to provide a bailout to a few worthy homeowners, Freddie Mac or Fannie Mae, or even lending institutions. Manipulating the housing market with borrowed cash and good intentions is a good way to drown us all.

And there simply aren’t enough life jackets to go around – or money to pay for them.

What do you think? Should we keep borrowing money to try to artificially prop up the housing market, or is it time to step back and let the market correct itself naturally? Here’s your chance to sound off now!

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Ken Speegle is a direct response copywriter, ghostwriter, and conversational writing specialist. He works with real estate agents, brokers and investors to expand their reach with conversational writing. By working with Ken, his clients are able to focus on their strengths instead of trying to figure out the best way to use the written word to make more money. For more about Ken Speegle, visit him on the web at www.therealestatewriter.com or by email at info@therealestatewriter.com. Ken personally responds to all inquiries.

You may recall that the  FHFA was created by the Housing and Economic Recovery Act of 2008, to oversee the two GSE’s, which together account for almost 3 quarters of the publicly held debt of the United States (almost 7 trillion dollars).

© Kalim - Fotolia.com

The secondary mortgage market is the backbone of the U.S. housing industry. Fannie and Freddie account for 65% of that market. Insuring the solvency of Fannie and Freddie is, at this point in time, essential to the survival of the housing market and the widespread availability of mortgage loans. The taxpayers are on the hook for the losses incurred by either of these agencies. And indeed, as I have documented in recent articles, the taxpayers are currently backing virtually the entire secondary mortgage market in the U.S., via Fannie, Freddie, FHA and USDA, which at present, account for around 95% of all new mortgage loans being issued.

So, in short, it is serious business to make any decision that could be fraught with unintended consequences. Mr. DeMarco is right, in my opinion, to insist on giving this matter his most careful study and consideration, before making any decision to proceed with any plan to reduce mortgage principal. But of course, careful study and consideration is not something that the government is given to doing, especially in an election year, when it is perceived that writing down these mortgages could help the current administration politically. At least that is the perception among Democrats, many of whom are demanding that DeMarco be fired for “standing in the way of progress in the housing market”.

But when you look at the big picture, this smacks of nothing more than election year political wrangling. 

First, Fannie and Freddie have already been the primary target of most of the current crop of housing initiatives for foreclosure aid, loan modifications and other programs for borrowers, with very little success to show for it.  There are dozens of programs already in place.  But these programs can only be applied to Fannie and Freddie owned mortgages, leaving the rest of the mortgages owned by other parties subject to totally different rules.

Secondly, while some in congress and the media would have the public believe that principal write-downs would help home owners and stem foreclosures, the real fact is that it would be at taxpayer expense. The banks are not going to lose anything.

Don’t be fooled into thinking that the recent settlement agreement between the states and the big banks means that the banks have suffered. They haven’t and they are not going to. At the end of the day, any principal reductions would be paid for by the taxpayers, not the lenders who made the loans, many of which should never have been made. That 25 billion dollar bank settlement is a joke when compared with the nearly 7 trillion dollars in mortgage debt that is guaranteed by the taxpayers via Fannie and Freddie. If you did enough principal reductions to simply stop all of the foreclosures, it would simply cost the taxpayers billions more to pay off the investors in those notes, the lenders…who only invest in such items because they are taxpayer insured, so they know they can’t lose. But even the lenders and investors in such notes do not favor principal write downs because of the potential future impact on contract law.

Which is a third potential dilemma: Rewriting enforceable contracts, signed by competent parties who agreed to be responsible for the debt could open a can of worms that could undermine the future of the secondary mortgage market. This could have a very negative impact on the future of the U.S. mortgage market from the perspective of attracting private investors back into the market.

And finally, there are justifiable worries about moral hazard. Frankly there is enough moral hazard on the side of government insured loans to argue that banks and lenders should never again have the luxury of making irresponsible loans that are guaranteed and paid for by the taxpayers. That is one form of moral hazard that contributed significantly to the housing bust, but is rarely discussed.

In the context of the position of FHFA and a decision to allow principal reductions, the question remains, “if you allow a program that specifically benefits those who are not making their mortgage payments on time, is it not reasonable to assume that this would encourage more borrowers to default, as a way to qualify for a principal reduction on their loans?” And especially so if they are current on payments, but owe more than their home is now worth.

Principal write-downs would do little to help home values, as reducing the amount you owe, down to the current value of the home might reduce the foreclosure rate to some degree, but the value of the homes would still be where it is today. And over the past 4 years, the damage to the housing market has already been done.

(If the banks thought for one minute that principal reductions would boost housing market values, they’d be all over it, because it would bolster the value of their worthless second mortgages, which are still a big problem)

If you ask me, Mr. DeMarco has plenty of reason and responsibility to be careful with any decision that would add to the already staggering taxpayer burden. Only political parties fighting for their life could justify such reckless last minute behavior after spending 4 years coming up with one poorly executed plan after another.   But after all, when it comes to housing policy, the federal government has a long history of poor decision making inspired by political expediency. ***
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Donna S. Robinson is a 16 year veteran of the real estate industry and a staff writer for Realty Biz News. She is an active real estate investor who also provides coaching and consulting services on residential real estate investing. You may join her email list on her website at www.RealtyBizConsulting.com   

Tax payers are hooked once again © Galina Dobrokhotova - Fotolia.com

Even after the collapse of Fannie and Freddie,  the insolvency of FHA, and a litany of bailout programs, including, but not limited to TARP, HAMP, QE1, QE2, HARP, TALF, and a host of others, too numerous and boring to list here, it seems that the only lending going on today in the real estate industry is insured by the taxpayers. Most folks may think that “government insured” means that some mysterious entity in Washington is simply printing money to cover any and all government insured losses. And yes, I know that the FED comes to mind…but it’s not supposed to be that way.

The truth is, the mortgage loan shenanigans continue. Even after the uproar over subprime lending, which led the first wave of mortgage defaults and bank failures, that became the housing meltdown, the sub-prime market continues. It’s growing even faster than it did the first time. And it’s no wonder, since the new lending guidelines for a “government insured” USDA Rural Development mortgage loan have NO minimum credit score, assuming other qualifying criteria are met. And a borrower can borrow 100% of the value of the home. It’s no wonder this program is growing at an exponential rate.  But this time, instead of private capital being at risk, it’s the taxpayers who will be responsible for these “government insured” mortgages.

In fact, according to an article written by George Brooks, published this week on insidemortgagefinance.com, the USDA is refusing to make public its default rates. The most recent data, published in July of 2011, indicated that the default rate was about 18%. That’s “official” numbers. It’s likely that this program, currently sitting on 80 BILLION dollars worth of taxpayer backed mortgage loans, actually has an expected default rate higher than FHA. When you consider that FHA and USDA are allowed to use accounting methods that would be illegal for private companies, it’s all the more disturbing.

The article also notes important data from Edward Pinto, Resident Fellow at The American Enterprise Institute saying:

“Among the USDA, FHA and Department of Veterans Affairs single-family mortgage programs, the USDA has shown the most explosive growth with a nearly tenfold increase in its share of the home purchase from 2005 to 2010, compared to a sevenfold increase for the FHA and threefold increase for the VA…”

That would be bad enough, but a study published in 2011 by the Office Of the Inspector General for HUD, dubbed “Operation Watchdog” determined that there are systemic problems with improper underwriting among lenders who originate FHA insured mortgage loans. A random study of a sample of mortgage loans originated by companies with high default rates found that 49% of the sample contained loan applications for borrowers who did not qualify for a wide variety of reasons such as lack of income, low credit scores, debts that were too high, or even no income and no credit at all. Many of the loans in this sample defaulted less than 12 months after origination. But the lenders had in fact certfied them as properly underwritten, and meeting FHA guidelines for loan insurance. The small funding fees charged to borrowers can’t possibly cover the costs of such high default rates.

In a nutshell, the lenders were originating loans that they knew were worthless, and falsifying their certification in order to sell them as FHA insured. These loans resulted in 23 million dollars worth of claims for 140 loan defaults, from the lenders included in this review.

The OIG also pointed out that FHA must pay these claims by law, before even investigating whether the loans were eligible for insurance payment. Only after the fact can FHA or HUD go back and check to see if a loan they paid a claim on, actually was legal and met the guidelines. If it was not, the agency must then spend more time and money to attempt to recover those insurance funds from the lender. Apparently the lenders themselves lobbied for this law, as it simply makes no sense.

Further, the Office Of the Inspector General for HUD pointed out that most claims are paid and NEVER reviewed to insure that the claim was legitimate. While HUD has attempted to put procedures in place, OIG found that there was no effective review process for these loan claims. So the taxpayers pony up millions in loan guarantees for bogus loans that never should have qualified for loan insurance in the first place.

While most of the recommended solutions are related to changes in existing procedures, or the implementation of new procedures for reviewing loans to insure that they are properly underwritten, it seems that no agency feels it necessary to act on anyone’s recommendations about making changes to existing plans. Indeed HUD responded to it’s own Inspector General by saying that it’s current plans were fine and that HUD felt there was no need to implement any recommendations from OIG.

The U.S. housing market was once considered to be one of the safest of investments for private capital. But government insured lending programs are turning it into a casino for unscrupulous lenders and borrowers. This has put the U.S. taxpayer on the hook for hundreds of billions of dollars in loan guarantees, while forcing concerned investors elsewhere in an attempt to protect their capital.
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Donna S. Robinson is a 16 year veteran of the real estate industry, and a staff writer for Realty Biz News. She is a coach and consultant to real estate investors. Join her email list on her website at www.RealtyBizConsulting.com to receive information on coaching, training and consulting programs for real estate investors. Her book “Fundamentals and Strategies For Buying And Selling Homes” is an easy-to-understand guide for beginning investors, home sellers and home buyers who want to avoid expensive government loans. 

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?”

It's hoped that HARP 2.0 will help millions more homeowners © Torian - Fotolia.com

First established in 2009, HARP was instigated as an option for underwater homeowners wanting to refinance their mortgage at lower interest rates. The original program was touted as the housing market’s ‘shining knight in armor’ when it was first rolled out, with government expectations that it would assist millions of homeowners who found themselves owing more on their mortgages than what their homes were worth.

Till now however, HARP has fallen woefully short of these expectations – prompting the government to relax eligibility requirements in an effort to help more people stave off foreclosure.

Billed as HARP 2.0, the government has extended the program until December 31, 2013 and set out new guidelines for those wishing to apply. One of the biggest criticisms of the original plan was that in order to qualify, homeowner’s loan-to-value ratio was required to be less than 125%, automatically ruling out millions whose home value fell below that figure. This requirement has now been relaxed with HARP 2.0, which stipulates that the property only has to be valued at less than the mortgage in order for homeowners to qualify.

In addition, the original HARP was restricted to the country’s five largest loan servicers – Bank of America, Citigroup, Ally Financial, Wells Fargo and JPMorgan Chase – further limiting the program’s accessibility.

Under HARP 2.0, the program is now available to all mortgage servicers, even in those cases where the mortgage had insurance attached, something that caused big difficulties under the original program. Mortgage insurers are required to sign off on a refinancing deal for any homeowner whose mortgage is insured, and now they are working with lenders to streamline this process, something that should result in many more approvals for HARP 2.0.

Certain rules remain in place for homeowners wishing to refinance through HARP 2.0. As with the original program, HARP refinancing is only available to Fannie Mae and Freddie Mac mortgages. Further, homeowners must be current with their mortgage, with no record of late payments in the last 12 months, and they must be able to show that they can afford the new payments on their home.

Aside from the changes in eligibility for HARP, the government is also making efforts to speed up the approval process, by eliminating the need for an appraisal in many cases.

For more information about HARP 2.0, and to find out if and when you can apply, check the official Home Affordable Remortgage Program website.