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Improvements to HARP proposed

Business: Obama instructs economic team to help homeowners refinance underwater mortgages

Posted: September 13, 2011 1:55 a.m.
Updated: September 13, 2011 1:55 a.m.
 

One of the areas President Barack Obama touched on in his “jobs” speech before Congress on Thursday night involved improving homeowner access to the Home Affordable Refinance Program, or HARP.

The president instructed his economic team to work with Fannie Mae and Freddie Mac, major lenders and industry leaders to remove barriers in the existing HARP program.

Designed to help homeowners refinance underwater mortgages on their homes to lower finance rates, HARP restricts homeowners from using the program more than once, said Fred Arnold, branch manager for American Family Funding.

But as home values continued to slide, and mortgage rates have rested at historic lows, people who refinanced at an earlier period, but may still need help, are blocked from refinancing, he said.

“There are a lot of homeowners that are upside down on their mortgages, but they are making their payments and should be allowed to refinance their houses,” said Mike Meena with Agusta Financial. “I think this would be fantastic for homeowners.”

Some critics reject more help for homeowners, saying the borrowers purchased homes they never should have been qualified to buy. But many experts say for the most part those homes have already gone into foreclosure.

“This program is for people who qualify,” said Arnold. “And it’s for owners who are making their (existing) payments on time.”

Improving access to HARP would not increase defaults for the most part because these are active, open loans already on the books and backed by the Fannie Mae and Freddie Mac programs.

“The banks are not adding any more risk than they are already on the hooks for; they’re reducing it,” Arnold said.

The benefit to allowing more homeowners to refinance is reducing consumer’s monthly mortgage payments, freeing up more money to pump back into the economy.

Another barrier for many is the 125 percent home loan to value ratio allowed under HARP, although it was raised from 105 percent in July 2009.

Because the number of home mortgages underwater increased as home prices continued sliding, many homeowners need a wider home-loan-to-value ratio margin to qualify for homes. 

Worse, many of the banks won’t even go that high. Arnold said they’re adding their own overlays or more stringent requirements.

While Meena likes the program, he has concerns that by the time it’s approved and is available to lenders, it will only serve as good press for Obama and his team and not benefit the consumer.

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