HARP – the Home Affordable Refinance Program – was supposed to help Americans refinance their homes into a more affordable payment. The goal was to refinance from 4 to 5 million mortgages by the end of June 2010. Instead, according to the latest reports, fewer than 300,000 homes have been refinanced under HARP.
The program has been extended for another year – through June 2011 – but so what? Is there any reason to believe that the program will more successful in the coming year?
HARP could have saved many homes from going into foreclosure when their adjustable rate mortgages reset – pushing the monthly payment to a level that consumers hit with the failing economy simply could not meet.
For others – it would have freed up a few hundred dollars per month that would supposedly have stimulated the economy through increased spending on consumer goods.
But this giant stimulus to the economy simply didn’t happen.
Homeowners tried, but for many the limit of refinancing at 125% of value shut them out. In hard-hit areas like Florida, California, Nevada, and Arizona, homes are now worth less than 50% of their mortgage balances.
For others, it was program guidelines and lack of cooperation from the banks that prevented the refinance. For instance, a homeowner with private mortgage insurance is limited to refinancing with their current mortgage company – a company that has zero incentive to help them reduce their interest rate.
Remember that this refinance program was (is) available only to homeowners who have not missed a mortgage payment. So why should a bank reduce their interest from 6.5% to 4.5% when they are able to make the larger payment? From the bank’s point of view, that’s like taking money from their pocket so the consumer can spend it somewhere else.
Like HAMP, which was supposed to have modified 4 to 5 million loans by now but has actually helped fewer than 400,000 homeowners, the big problem is lack of cooperation.
The banks, while being “encouraged” to participate, have no real incentive to do so. Thus, homeowners who want these programs must be persistent and insistent.
One homeowner who was successful in obtaining a lower interest refinance at 125% of value cited 6 months of sending and re-sending documents as they were either lost or his file was transferred to a new servicer. He began with weekly calls and emails and finally ramped it up to more than one a day.
He said that it was easy to see why some homeowners would give up before getting to the finish line. People with jobs that prevent them from making phone calls and sending emails during business hours on a daily basis simply get ignored, and the many setbacks and mistakes on the part of the bank can make it seem impossible to reach the goal.
In his case, the “squeaky wheel” finally did “get the grease.” He advises other homeowners who want and need a lower payment to never give up.
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