HARP is still out there -- so why aren't more borrowers taking advantage of it?

How to tap into the 800,000 borrowers nationwide who could still benefit from the refinancing program

Last week, Mel Watt, the director of the Federal Housing Finance Agency, was reminded of HARP’s complexities, when he and other U.S. housing officials visited Detroit to promote the program. The group was confronted by about 150 protesters who say the program is hard to qualify for and doesn’t go far enough, according to The Detroit News.

Yet the FHFA estimates there is as many as 800,000 U.S. borrowers who meet the general HARP eligibility requirements –  owe $50,000 or more on their mortgage and pay an interest rate that's at least 1.5% higher than current rates – have so far stayed on the sidelines.

HARP was launched in 2009 in an effort to provide distressed homeowners some relief by offering a refinance opportunity to those who owe more on their mortgages than their homes are worth. When the housing market started to showing signs of recovery, it appeared the program’s heyday was coming to an end. However, HARP hasn’t fully maximized and was extended last year to expire on Dec. 31, 2015.
 
Since April 2014, nearly 3.2 million borrowers have refinanced through HARP, according to the FHFA. On average, homeowners who refinance through the program saved nearly $200 per month. That's more than $2,000 a year. So, if HARP is such a good deal, why have so many eligible homeowners not refinanced?

Despite being revised several times, the program has proved to be exceptionally complex, which has made it extremely hard for homeowners to qualify for the refinancing option. According to the FHFA, many of its servicers said that the potential savings sound too good to be true to borrowers and they suspect that the program is a scam.

The key to accessing the 800,000 U.S. borrowers who meet the general HARP eligibility requirements is through education. Watt is urging the housing community to help spread the word that those who are eligible for HARP should apply.

"[HARP] has been on the books since 2009, and we have had tremendous success, but we're down to the people who still don’t believe this is a credible program,” said Watt. “And we need your help to deliver the message to them that it is.”

Is your borrower ripe for HARP?

#pb#

If the answers to these questions are “yes,” then the borrower may qualify.
  • Does Freddie Mac or Fannie Mae own or back his or her mortgage? Check here.
  • Was his or her mortgage originated on or before May 31, 2009?
  • Is he or she underwater, or have a current loan-to-value ratio greater than 80 percent?
  • Is he or she current on their mortgage payments?
  • Is his or her recent mortgage payment history good? That is, the borrower doesn’t have any 30-day or more late payments in the past six months and no more than one late payment in the past 12 months?
  • Is his or her home their primary residence, second home or investment property?

The HARP program also proves to be exceptionally complex, which has made it extremely hard for homeowners to qualify for this refinancing option. In a struggling city like Detroit, its homeowners, who are looking to get above water on their mortgage payments, want more from the program.

Activists and homeowners told Watt at the Detroit event last week that HARP (Home Affordable Refinance Program) still has several issues. The program requires homeowners to be current on their mortgage payments for the last 12 months and doesn't reduce principal owed by borrowers, making it less attractive for those whose homes have plummeted in value.

According to Steve Babson, a spokesman for Save Detroit -- Save Our Homes,  40% of Detroit homeowners owe more on mortgages than the properties are worth and nearly 10% are behind on payments, reported Bloomberg

Babson said that Detroit needs a program that will address its thousands of residents who are dealing with unemployment and medical costs. “We don’t need just lower interest on an inflated mortgage balance. We need principal reduction,” he told Bloomberg.

FHFA is set to enable principal reductions for borrowers through a program called the Neighborhood Stabilization Initiative. Starting this fall, Fannie Mae and Freddie Mac will begin selling loans to nonprofit groups that can reduce the principal balance if they believe it helps keep borrowers in their homes.