HARP Loans

Has anyone had experience with this program? We were offered a stream-line refi with HARP but we are not underwater and we have excellent credit. What does the lender have to gain and, would acceptance tarnish or mar our future credit. Something seems amiss.

 

I did a HARP refi. It is just a normal refi that lets people who have paid on time take advantage of the lower rates. It goes through your current mortgage company and it gives them a more liberal guide lines. It does not have any effect on your credit. However if you have 20% equity in your house you should shop around for lower rates and fees. I'm not saying you will find better but you should check. It is a big help for those who would not normally qualify because they owe to much or have had some income loss but can make the lower payment. It falls under the Obama Save A Home program.

Hope that helps!

 

Steve, that is reassuring to know but it would seem the lender has quotas to meet and would want to offer this program to their clients who are underwater...then again, I suppose they would prefer to retain their goodstanding clients over the long term. They do not require an appraisal, nor proof of employment and income, and they are paying the application, title, and legal fees.

Do you know if the lender nets a benefit by participating or is it a federal mandate for all Fannie Mae/Freddie Mac loans?

 

My mortgage lender, Chase, approached me to offer a refi thru HARP. I was only going to save $90 a month and was not going to bother. They were not charging anything to refi. I couldn't believe the offer and kept asking why they were offering it to me as I didn't need it. I was told they were only offering it to their best customers. Some of their customers were starting to shop around for other mortgages and they decided to try to hold on to the better ones with the offer. I ended up doing it and it turned out to be exactly as I was told. They even sent someone to the house to do the closing. The rate I got was almost the same as other places were offering at the time but the zero costs for closing you could not get elsewhere.

 

Each homeowner can only do it once and I'm sure the banks make a regular profit.

 

Steve, Do you know if there are programs out their to help people who are under water?

 

...or who aren't underwater, but don't really have any equity either?

 

Sorry I should have been clear.
Yes with no equity!!!

Checked with few banks and credit unions and they all wanted me pay of the difference. I do not pay off all my savings just to refinance the house, so currently put the refinance thought on hold....

 

Call your current loan servicer/mortgage company and ask about HARP. The regular customer service people may know nothing about the program so make sure you get through to the HARP specialists. They will tell you if you qualify with no equity or even if you are under water.

Hope that helps.

 

Your loan must be owned or guaranteed by Fannie Mae or Freddie Mac.

 

Here is the link to the 'Look Up tool' for Fannie Mae.

http://www.fanniemae.com/loanlookup/

If your loan is owned by Fannie, then you can potentially get a HARP loan. But if you have Equity, you can find better rates in the market.

 

We were not under water either when Chase made us an offer but it appears they are approaching many customers who are "at risk." It doesn't hurt to ask either if they haven't approached you yet.

Big Banks Easing Terms on Loans Deemed as Risks
As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.

Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.

Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.

Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.

Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.

Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure.

“It’s a huge problem,” said the economist Sam Khater. “Reducing negative equity would spark a housing recovery.”

While many homeowners desperately need help to keep their homes and cannot get it, the borrowers getting unsolicited relief from Chase sometimes suspect a trick. Cutting loan balances, even for loans in default, is supposedly so rare that Federal Reserve economists wrote in a paper in March that “we could find no evidence that any lender was actually reducing principal” on mortgages. “I used to say every day, ‘Why doesn’t anyone get rewarded for doing the right thing and paying their bills on time?’ ” said Ms. Giosmas, who is an acupuncturist and real estate investor. “And I got rewarded.”

Option ARM loans like Ms. Giosmas’s gave borrowers the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balances would be added to the body of the loan.

Bank of America and Chase inherited their portfolios of option ARMs when they bought troubled lenders during the housing crash.

Chase, which declined to comment on its program, got $50 billion in option ARM loans when it bought Washington Mutual in 2008. The lender, which said last fall that it had dealt with 22,000 option ARM loans with an unpaid principal balance of $8 billion, still has $33 billion of them in its portfolio.

Bank of America acquired a portfolio of 550,000 option ARMs from its purchase of Countrywide Financial in 2008. The lender said more than 200,000 had been converted to more stable mortgages.

Dan B. Frahm, a spokesman for Bank of America, said it was using every technique short of principal reduction to remake its loans, including waiving prepayment penalties, refinancing, lowering the interest rate, postponing some of the balance and extending the term.

“By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments,” Mr. Frahm said.

Chase, Bank of America and the other big lenders are negotiating with the Obama administration and the nation’s attorneys general over foreclosures. Debt forgiveness and the moral hazard question of who deserves to be helped are among the most contentious issues.

The banks say cutting mortgage balances would be unfair to borrowers who remain current as well as impractical because so many loans are securitized into pools owned by investors. Bank of America’s chief executive, Brian T. Moynihan, told the attorneys general in April that cutting principal for current borrowers would send the wrong message to all those who have struggled to pay their bills. His counterpart at Chase, Jamie Dimon, bluntly said it was “off the table.”

Having an option ARM loan, however, apparently qualifies the borrower for special help. The loans, with their low initial payments and “teaser” interest rates, were immediately popular with buyers who could not afford or did not want to pay the soaring prices on houses. The problem was, eventually the rate would reset or the loan balance would have to be paid in full. “Nightmare Mortgages” they were called in a 2006 BusinessWeek cover piece.

Option ARMs were never quite as bad as predicted, partly because the crisis pushed down interest rates so far that the resets were relatively mild. Many owners did default on them, but others, like Ms. Giosmas, were quite happy to pay less for years than they would have under a conventional loan. She used option ARMs on her investment properties too.

“They saved me,” she said. “Why would I want to pay a lot more every month? I’d rather have it in my pocket.”

The concern the banks are showing for those who might get in trouble contrasts sharply with their efforts toward those already foreclosed. Bank of America and Chase were penalized last month by regulators for doing a poor job modifying mortgages in default. Adam J. Levitin, a Georgetown University law professor, said these little-publicized programs were more evidence that the banks were behaving in contradictory and often maddening ways.

“Loan modifications that should be happening aren’t, while loan modifications that shouldn’t be happening are,” he said. “Homeowners of any sort, whether current or in default, would rightly be confused and angry by this.” The homeowners getting new loans, however, are quite pleased. In effect, the banks are paying the debt these owners accrued as the housing market plunged.

Ms. Giosmas bought her two-bedroom, two-bath apartment north of downtown Miami for $359,000 in early 2006, according to real estate records. She made a large down payment, but because each month she paid less than was necessary to pay off the loan, her debt swelled to about $300,000.

Meanwhile, the value of the apartment nosedived. By the time Ms. Giosmas got the letter from Chase, the condominium was worth less than half what she paid. “I would not have defaulted,” she said. “But they don’t know that.”

The letter, which Ms. Giosmas remembers as brief and “totally vague,” said Chase was cutting her principal by $150,000 while raising her interest rate to about 5 percent. Her payments would stay roughly the same.

A few months ago, Ms. Giosmas sold the place for $170,000, making a small profit. Having a loan that her lender considered toxic, she said, “turned out to be a blessing in disguise.”

http://www.nytimes.com/2011/07/03/business/03loans.html?_r=1&nl=todaysheadlines&emc=tha2