Making Homes Affordable; HARP, HAMP

The Making Homes Affordable Program is another strategy by which our current administration is making efforts to help those who suffered during the mortgage crisis, and therefore get the economy back on track.

Currently, this program offers two solutions for those who qualify, though because it is a fairly new initiative, additions and modification are in the works.

First, is the Home Affordable Refinance Program (HARP). This program is designed for homeowners who are current on their mortgage payments, but who have not been able to qualify for refinancing because their home decreased in value. With this program in place, they now may qualify to take advantage of the current low rates. To qualify, these criteria have to be met:

• Your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
• You are current with your payments, meaning you’ve never been more than 30 days past due or, in case you’ve only had your mortgage for less than a year, you’ve never missed a payment.
• The amount you owe on your first mortgage isn’t more than 125% of the current market value of your home.
• You have a reasonable ability to make new payments. If you have a steady job and have been able to make your payments at your current rate, this should be easy.
• The refinancing will improve your mortgage terms, long term. To determine that, your mortgage loan officer will (should) issue you a HUD statement which will show your new interest rate, your monthly payment, and the total amount paid at the maturity of the loan. You will have to compare this HUD statement with your current mortgage terms and see where you stand.

If the HARP turns out to be the right choice for you, ask your mortgage officer for an application. You will also have to submit a series of documents (as with any government program), such as your pay stubs, recent tax returns, statements about your credit card debt and other debts and payments of them, and possibly more, depending on your individual situation.
Oh, and the HARP expires on June 10th, 2010, so if you haven’t applied yet and you think you qualify, you better get on it – NOW!

Second, is the Home Affordable Modification Program (HAMP).
This program is geared towards people who are having difficulties making their monthly mortgage payment, or for those who are already behind. Unlike HARP, you may qualify for this program regardless of who owns or guarantees your mortgage. The ultimate goal is to prevent more foreclosures from rising up. To qualify:

• You need to be an owner/occupant of your primary residence. Your beach house won’t qualify.
• The unpaid principal of your mortgage has to be less than $729,750.
• Your mortgage date has to be on or before January 1st, 2009.
• Your monthly mortgage payment has to exceed 31% of your gross monthly income aka, your income before taxes.
• Documents that prove your financial hardship, such as loss of employment, change of income, divorce, etc.

Your servicer (whoever you’re making payments to), will be able to determine whether you qualify and what other documents you’ll have to submit. Also, they will be able to determine whether or not your modified loan is of a greater value to the provider of the loan. If not, they may still modify it, though they’re not required to do so. If, however a value test determines that the loan will be of greater value to the provider, they will have to modify it, as required by HAMP.

After that, if you accept the modification, you will be put on a trial modification period (3 months) to see if you can successfully submit the payments. If so, the modification will become permanent. But, the HAMP expires on December 31, 2012, so you want to make sure your modification period starts before that date.

The Treasury Department is giving a lot of financial incentives to loan providers to lower your mortgage down to as much as 2%. If that doesn’t result in a mortgage payment below 31% of your gross monthly income, they may extend the term of your loan to up to 40 years. And if that’s still not enough, a portion of your principal may be deferred (you’ll have to pay it later) or even forgiven.

I realize that even with all these wonderful programs, incentives, and options out there, there are still a lot of people who are about to go into foreclosure on their home. Just know that foreclosure proceedings cannot take place while you’re being evaluated for HAMP or when you’re approved and put on a trial modification period. So, it is definitely worth a shot.

From what I understand, all of the above – as great as it sounds on paper – can be a frustrating, lengthy procedure. But, as I said before in my Homeowners Assistance Program article, it is a form of help that is out there right now, and if you qualify, then I think it would be foolish not to take advantage of it.