How Does HARP 2.5 Sound?

April 29, 2013 4 Comments »
How Does HARP 2.5 Sound?

For the past couple years now, there has been a big push for a so-called HARP 3.0, which would essentially open the door to private-label refinances under the popular Making Home Affordable program.

Since inception, only Fannie and Freddie mortgages have been eligible, despite private-label mortgages accounting for more of the carnage that led to the housing crisis.

Still, such negotiations have always ended in an impasse, likely because investors don’t want to lose any money by giving homeowners who are able to make payments a break.

But that hasn’t stopped the Obama administration from fighting for such a program, despite it now being years since the crisis first reared its ugly head.

Will Eligibility Date for HARP Be Pushed Forward?

Apparently a bunch of mortgage executives met with White House officials last week to discuss the current situation in mortgage and housing.

And one official familiar with the talks told Inside Mortgage Finance that the Obama administration will “push hard” for HARP 3.0, that is, an underwater refinance program for non-Fannie/Freddie mortgages.

Unfortunately, there’s still a lot of doubt surrounding such a push, seeing that the bill would need to make its way through Congress before landing on Obama’s desk for signature.

As I mentioned, we are now years away from the height of the mortgage crisis, so convincing a bunch of lawmakers to ease payments for mortgagors now seems a lot less likely.

This would have made sense when housing was in the gutter, but now that everyone and their mother wants to buy a home, it doesn’t seem as promising.

[See: Why it’s a bad time to buy a house.]

Still, if HARP 3.0 doesn’t get the green light, there is still hope for an expanded HARP, which I refer to as “HARP 2.5.”

At the moment, the cutoff date to be eligible for HARP is May 31, 2009, meaning your mortgage must have been sold to Fannie Mae or Freddie Mac by that date.

If you took out a mortgage after that time, and your property plummeted in value, you’re essentially out of luck.

By out of luck, I mean you probably can’t refinance for lack of equity, assuming you didn’t put down a huge down payment.

A possible extension would move the cutoff date to somewhere in 2010.

This extension isn’t a new idea – it was included in a bill put forth by Senators Barbara Boxer (D-CA) and Robert Menendez (D-NJ), known as, “The Responsible Homeowner Refinancing Act of 2013.”

However, that seemed to fall on deaf ears, and was about as popular as “The Responsible Homeowner Refinancing Act of 2012.”

Is It Just Too Late to Offer Relief?

I’ve covered this subject many times on this blog, largely because it keeps resurfacing. Or reHARPing, if you will.

Unfortunately, every time it does, more time has passed. And as more time passes, those who still remain current on their mortgages seem less a threat to default.

At the same time, home prices continue to march higher, meaning far fewer homeowners are actually underwater and in need of a HARP refinance.

Sure, home prices took a dive from 2010-levels, but prices have since climbed higher in most parts of the country. And they’re only expected to go higher from here.

So there’s a decent chance that many of these homeowners can now explore a traditional refinance, assuming they’ve made on-time payments and paid down some principal.

It seems housing officials are more concerned with homeowners who actually pose a threat to the recovery, which is why the Streamlined Modification Initiative, aimed at severely delinquent borrowers, was recently launched.

For those who can make their payments, there is little incentive to offer a lower mortgage rate, especially if the future appears bright.

4 Comments

  1. warren April 30, 2013 at 4:56 am -

    What is missing is the fact that many homeowners who took advantage of it once can’t do it again. One and done!
    So if someone went from 6% to 5% they are now stuck with this rate.
    Even if they are not underwater they most likely would need to get PMI to get to today’s market rate.
    These homeowners should be given the break too.

  2. Colin Robertson April 30, 2013 at 9:54 am -

    Warren,

    I don’t know if being “stuck” with a 5% fixed rate is so bad…sounds pretty good for someone who wouldn’t normally even be able to refinance, but I see your point with rates in the 3% range. Still, a line must be drawn to prevent serial refinancing under a government program. Someone already tried to get support behind reHARPing, but it didn’t pan out.

  3. Celine July 12, 2013 at 5:32 pm -

    I think it’s lame that the government won’t allow a HARP 3. The White House has been supportive of it for months, but Congress won’t act. It’s called the MyRefi…look it up and support it people!

  4. Colin Robertson July 14, 2013 at 2:50 pm -

    If you want to support HARP 3.0, start tweeting with the hashtag #MyRefi and share it on all forms of social media, such as Facebook, Google+, and so on. The White House has recommended this very method for spreading the word…

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