Sunday, September 1, 2013

The HARP 3.0 Home Affordable Refinance Program

The federal HARP (Home Affordable Refinance Program) mortgage program has been a godsend to homeowners with existing mortgages who desired to stay in their homes, but found their home worth much less than they owed. HARP allows them to refinance at a much lower rate, thereby lowering their monthly payment, while continuing to own and live in the home. Originally HARP 1.0 was pretty restrictive and few people took advantage of the program, but when HARP 2.0 was designed, it was far less restrictive, and more and more homeowners took advantage of the program. But HARP is scheduled to expire at the end of 2013. It appears it will be extended, more on that in a minute. To be eligible for HARP your present mortgage must: 1. Have been securitized by Fannie Mae or Freddie Mac on or before 5/31/2009, with a loan-to-value (LTV) equal to or less than 200% of the current market value of your home. 2. You must be current on existing mortgage payments and 3. make sufficient income to support the new mortgage payments. (The interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Federal income tax purposes.) A tax advisor should be consulted for further information regarding the deductibility of interest and charges. In a recent conference meeting Michael Stegman of the U.S. Treasury told attendees that President Obama is working to extend the program and make some significant changes. These would include accepting privately held, non-Fannie Mae or Freddie Mac home loans into the HARP program. Privately held mortgage loans, meaning someone like Wells Fargo or Bank of America holds the mortgage instead of Fannie Mae or Freddie Mac, are the reason that millions of underwater homeowners cannot qualify under HARP 2.0. Government statistics indicate that these mortgages are responsible for nearly 2/3rd of mortgage delinquencies, a growing problem for the entire housing market. The President doesn’t necessarily need Congressional or even the bank’s approval to move forward as the Treasury department already has the authority to modify many of these privately held mortgage loans, compensating investors for their losses in the process. Most industry analysts agree that the program has been quite successful, particularly given the underwhelming results of earlier iterations of refinance and modification programs. There have been complaints that a series of remaining frictions have allowed lenders to extract higher profits on heavily underwater loans. New Jersey Senator Robert Menendez and California Senator Barbara Boxer have introduced legislation aimed at protecting lenders from losses on refinancing privately-held underwater mortgage loans. The proposed changes would also extend HARP 3.0 for another twelve months. There are several encouraging points to this Home Affordable Refinance Program legislation of interest to those not eligible for HARP 2.0: Incentives to Increase Lender Participation Allow For Non Fannie and Freddy Mortgage Loans Eliminate The Mortgage Cutoff Date of May 31st, 2009 Extend HARP 3.0 by Another Year This is the kind of encouraging HARP 3.0 news underwater homeowners have been waiting for and would benefit the government by reducing delinquencies and foreclosures. If there’s one constant in Washington it’s that Democrats and Republicans can’t even agree to disagree. The longer they delay updating HARP 3.0 the more underwater mortgage holders are motivated to just walk away from their homes. Dane Hahn is a real estate professional serving Florida's Sarasota and Charlotte Counties. Call him at 941-681-0312, email at or see him on the web at

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