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Feds roll out revised help for homeowners

New details suggest the government's latest mortgage program -- HARP 2.0 -- won't make refinancing easy for underwater homeowners.

By MSN Money Partner Dec 1, 2011 5:24PM
This post comes from Annamaria Andriotis at partner site SmartMoney.
SmartMoney on MSN MoneyHomeowners can start applying for the government's revamped refinancing program today. But much like the first time around, experts say many borrowers will see it as too little too late.
The program is intended to help borrowers who owe significantly more on their home than what it's currently worth. It expands on the original Home Affordable Refinance Program, or HARP, which was created to help borrowers who owe up to 105% of their home's market value to refinance their mortgage, and was later expanded to those who owed up to 125%.
This newest incarnation, dubbed HARP 2.0, removes the 125% cap, allowing borrowers who are deeply underwater to get a new mortgage at a lower interest rate and with more affordable monthly payments. To qualify, borrowers must have either a Freddie Mac- or Fannie Mae-backed mortgage.

While experts say the new HARP will help more borrowers -- roughly 11 million homeowners are underwater, according to data and analytics firm CoreLogic -- they point out its limitations.


There may be delays

For starters, the whole process could take months. Lenders who underwrite mortgages manually can start processing refinancing applications this month, say spokespeople from Fannie Mae and Freddie Mac. But those who depend on an automated software system to underwrite mortgages must wait until updates are made, says Brad German, a Freddie Mac spokesman. (Many lenders rely on the automated system.)


Those lenders won't be able to start processing applications and delivering loans until at least early February for Freddie Mac-backed mortgages and until March for Fannie Mae-backed mortgages.


That's not the worst of it, say experts: Some borrowers might not be able to qualify at all. Post continues below.

The program requires that borrowers have missed no more than one payment during the past year and none during the past six months, says Keith Gumbinger, vice president at HSH Associates, a mortgage-data firm. If they don't meet this criterion, they'll have to wait until they do in order to qualify.


Also, borrowers who've already refinanced through HARP are ineligible. "It's a nice little step, but (it's) not really going to get the housing market restarted," says Ira Rheingold, executive director of the National Association of Consumer Advocates, whose members include attorneys that represent distressed homeowners.


What's more, the program is entirely voluntary. Lenders are not required to refinance mortgages for underwater homeowners. (The government doesn't provide incentives for lenders to participate in HARP.)


Many homeowners who qualified for the existing HARP program were turned down because lenders were unwilling to take on that risk, says Gumbinger. Lender resistance may also derail some borrowers' attempts to refinance under HARP 2.0. It's up to each lender to determine whether they'll participate in the program. (Freddie Mac lists participating lenders on its website.)


That said, experts say some aspects of refinancing will get easier. For example, borrowers who apply to the same lender to whom they make their monthly payments won't have their credit scores checked, they point out, and won't be required to provide documentation proving their income. The lender will simply call the borrower's employer to confirm job status. That could come as relief for borrowers who've recently experienced a pay cut or a ding to their credit score. (Estimate your credit score for free.)


Is it worth it? Gumbinger points out that qualifying homeowners stand to save thousands of dollars over the life of the loan by refinancing to a lower rate. However, the program does not reduce mortgage principal, so even after successfully refinancing, borrowers will still remain underwater, he says.


More on SmartMoney and MSN Money:

Dec 1, 2011 8:50PM

They’ve already wasted hundreds of billions on several programs that have been epic  failures, this will in all likelihood be another colossal failure and waste more taxpayer dollars.


Government intervention is, in large part responsible for the mess, and more government meddling is only making things worse.


The process, to included foreclosure, will have to occur before we can get this behind us.  The more the government intervenes the longer it’ll take to get past this.


“The government isn’t the solution to the problem, the government is the problem”

Dec 1, 2011 9:34PM

We can call this "CASH FOR IDIOTS" - These people will only keep the home if the real estate market improves "SOON" to get their position of equity at 0 or above.  If not they will let them go.


Where is the help for those who have real equity and got real loans?




All it does is screw things up!

Dec 2, 2011 12:18AM
This may sound good to some people, but the banks turn you down if your income isn't high enough for their standards, so this supposed "fix" is not a fix at all. The banks are in control of who they give their loans to, no matter what regulation the president changes.
The loan rates are low, but most people still can't get any. Not unless their income is high enough for the debt to loan value they now require. I believe they want it to be at 70% now. That isn't easy when your under water.
Normally...I support the president, but for this's only a farce to make the president sound like he's doing something good for us. NOT !!

Dec 2, 2011 10:14AM

This is not help for home owners - it is help for people who DON"T own their homes.

Dec 2, 2011 12:31AM
Yeah right...Go ahead & give the banks more money & wait to see IF they give loans to those who really need them. It was all to benefit the rich. AGAIN.
Just like the republicans in congress are playing games to assist the rich too.
They vote down continuing the tax break middle class people needed because we'd have to tax the very rich in order to pay for it. God forbid...we tax rich folks who can afford it.  U those who earn/make over 2 mill. a year. Yes...U are rich. I'd trade with U any day.
It's a shame too, because a lot of rich folks agree to pay more taxes, except the politicians.
They don't wanna give up any of their pay raises or tax breaks or benefits in retirement. But they sure don't give a hoot if we have any left.
The state of this country is an abominable shame. I bet U every other country is all laughing at us right now. I would.

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