In February of 2009 when the government unveiled itâ€™s three-pronged attack to stop the sinking housing market, there were great expectations. The Home Affordable Refinance Program, also known as HARP, was expected to help 4 to 5 Million homeowners with loans backed by Fannie Mae or Freddie Mac. These owners were being offered the opportunity to refinance their mortgages at lower rates.
The goal of HARP was this-Make the home more affordable and fewer people will default, even though their homes have dropped in value.
Fast forward 2 years and approximately 900,000 homeowners have been fortunate enough to take advantage of this program.
The reason for the failure--The program guidelines prevented those who lost a substantial amount of value in the crashing market from qualifying for the help. That was the case for most Tampa Bay real estate owners.
So last month, substantial changes were made, and the result of these changes will make it much easier for Tampa Bay homeowners to reduce the payments on their underwater mortgages.
The first change was the elimination of the loan to value limits. The original plan required the LTV not to exceed 125% of the homes current value. In real estate markets like Florida, this eliminated anyone who purchased a home at the peak of the market. These were the people the program was supposed to target.Â Home values inÂ Tampa and the surrounding communitieshave fallen 45% on average since 2006 and in some areas it has dropped even further. Now it doesnâ€™t matter how far underwater they are.
The second change helped lenders doing the refinance by letting them off the hook for refiâ€™s that go bad. The government will eat that cost if it happens.
The positives of the changes are:
People upside down on their homes who are current on their payments can reduce their monthly mortgage payment by several hundred dollars.
The risk of more foreclosures is reduced by making the home a little more affordable for the underwater owner.
The program doesnâ€™t help people who are already behind on their payments which is where the â€œshadow inventoryâ€ lies.
Loan Servicers may not be prepared for the millions of people that will be trying to refinance their mortgages over the coming months.
To find out if you qualify for the new HARP program click on this link: