Oct
31
Written by:
Rob West
10/31/2011 10:06 AM
THE FACTS:
President Obama announced a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low rates and lower their home loan payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify. Here are more details about the newly announced changes to the program:
- What is HARP? It’s a program started in 2009 that allows home owners to refinance their home loans at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender.
- What’s changing? Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen.
- Who’s eligible? Home owners with loans backed by Fannie Mae or Freddie Mac can participate. Home owners must also be current on their present home loan.
- When will it take effect? The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.
- How successful will this be? The administration hopes that by home owners being able to lower their monthly payments they’ll be more likely to stay current on their home loan and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan.
Sources: Fannie Mae, Associated Press and Reuters
MY OPINION:
It's about time! In fact, this move is about 18 months overdue. It shouldn't have taken the Administration so long to recognize a failed plan (and execution thereof). How many homeowners do you know who are struggling to make ends meet AND have 20%-25% equity in there home? I know of none. The people I run into who need help the most are those who borrowed in a market that allowed 100% + LTV. It pains me to see these short sales closing for below-market sales prices that the current owners could have afforded if given the chance. Rather, they are forced from there homes, typically with no proceeds, and into a renting situation for the next several years; bad for the market and bad for society! If the Administration and lending industry would have began writing down principal balances for primary homeowners in 2009, the markets would be much more stable today. They're writing off lost principal in short sales every day so why not save us all the trouble and help the homeowner stay in their home. Programs like HARP, HAMP, Loan Modifications have all been a joke so far and have failed miserably.
Hopefully this new version of HARP is the answer and the lending industry can implement and execute Obama's changes quickly. It's a good idea but without swift and proper implementation it's just cause for more false hope and frustration. Unfortunately, it's too little-too late for many homeowners who are now renters tainted on the "American Dream".
(opinion expressed above is that solely of Rob West, Broker-Manager of Coldwell Banker Premier Properties and is based on real world experiences)