More Hope for Homeowners coming in the form of HARP

Hope(less) for Homeowners.....Is HARP More of the Same for San Diego Homeowners?

The Hope for Homeowners, (HFH) was a plan that went into affect last summer to help stop the amount of foreclosures taking place. The program relied on the lenders willingness to take a reduction in the loan amount. They were asked to refinance the home at 90% of the property’s value thus writing off a large portion of principal. Then the homeowner had to be willing to split their future equity with the U.S. Government. So no one participated. In fact, an article on CNN.com from May pointed out that, after 7 months, the HFH program had only helped 1 person! A far cry from the 400,000 homeowners the plan claimed it would assist.

So, will the Home Affordable Refinance Program, (HARP) end up as useless as HFH? Well, not as bad. I know I have done 2 HARP loans in my office alone since April so already that’s one more than the national average for HFH. But the HARP program is not without issues. It does reward borrowers who have kept current on their mortgage with an opportunity to refinance out of an adjustable or higher rate and into today’s lower fixed rates even if they are upside down in equity. Yesterday it was announced that the property can now be up 25% negative or 125% loan to value. This is an increase from the original 105%. As property values decline most homeowners in San Diego found they couldn’t use the program because they were more than 5% upside in value. The S&P Case-Shiller Home Price Index shows a 20% drop in San Diego home prices from April 2008 to April 2009.

However, other issues are still making it difficult for the homeowners who were supposed to be helped by this program. For example, lenders are adding their own guidelines and restrictions to the program. Plus, the newly enacted Home Valuation Code of Contact, (HVCC), which restricts conversation between loan officers and appraisers, is causing further problems. The other quirk is the home loan has to be owned by either Fannie Mae or Freddie Mac. Many homeowners who need help have loans that were never sold to Freddie or Fannie. In addition, technical issues in how the loan was recorded can keep homeowners from accurately knowing if there loan is owned by Fannie/Freddie. So, wrong information can result in an eligible property owner becoming ineligible for the program.

Overall the program has been more effective than the Hope for Homeowners, but there are still a lot of kinks to be worked out before it will be the saving grace the administration hopes it will be.