September 18, 2009

"Making Home Affordable" the report card ... HAMP & HARP = Hope?

Remember when our government was passing one housing rescue plan after another beginning in late 2007. Banks were "encouraged" to help struggling homeowners modify their loan. That didn't work as foreclosures continued to climb. After taking over Fannie Mae and Freddie Mac they imposed a six month foreclosure moratorium from November 2008 through April 2009. It just delayed the inevitable. That brings us to the $75 billion Making Home Affordable plan.

Making Home Affordable - MHA was announced in February 2009 to help stabilize the housing market. Under this umbrella two seperate programs with different objectives were born. So let's get you up to speed on HAMP (no ... I'm not blowing smoke) and HARP and see it there is any HOPE for you.

Home Affordable Modification Program - HAMP gives financial incentives to mortgage servicing companies for offering trial loan modifications to an estimated 2.7 million at-risk homeowners. To be considered for the program a homeowner must be at least 60 days behind on their mortgage or already in foreclosure.

According to a July 31st Treasury report card, $20 billion has been doled out to more than three dozen large and small servicing companies participating in HAMP with results showing 15% or 400,0000 homeowners out of the 2.7 million eligible have been offered trial modifications that involved reducing the interest rate on a loan for several years and/or extending the term of the loan.

Homeowners who have contacted their loan servicing company asking for a loan modification with little success may find better results by going back and asking for help under the HAMP program.

Home Affordable Refinanace Program - HARP is designed to help responsible homeowners who pay their mortgage on time refinance out of a risky loan into a stable loan and lower their mortgage payment. With declining home values preventing a traditional refinance, HARP allows homeowners to refinance up to 125% of their home's value. To give you an idea of what that would mean, assume a home value of $300,000 with a mortgage of $365,000. Applying 125% to $300,000 = $375,000. That's below the loan-to-value LTV ceiling. Other loan qualifying factors will apply. A key feature of this program ... the homeowner will not be required to get private mortgage insurance PMI if their original LTV ratio was 80% or less.

Fannie and Freddie had been allowing a HARP refinance up to 105%. To help more homeowners, they will increase their LTV ceiling to 125% effective September 19th, 2009. It may take time for mortgage companies to begin offering the 125% refinance option so be prepared. Follow these links to find out if your mortgage is owned by Fannie Mae or Freddie Mac. You can also double check with your existing mortgage servicer to find out who owns your mortgage. Qualified homeowners have the option to apply for a HARP refinance with their existing servicer or shop for a competitive loan with a new lender.