Here is some information that might start you on your way to understanding whatâ€™s going on with Refinancing, Loan Modifications and in particular, Obamaâ€™s H.A.R.P. Program:
One report I read, showed that during the initial HARP period, only about 10% of the goal was achieved for helping homeowners in distress. While 10% is a pitiful result, the scuttlebutt is that the actual number is considerably lower; possibly as low as 60,000 (3%)!
One explanation was that INTEREST RATES had fallen so low, during the life of the program, that the Banks were doing Loan Modifications on their own! (Unbelievable!)
I understand that the primary reason for the breakdown in communication, is a new-fangled problem called â€œOUTLYINGâ€:
What this means, is that when a Lender declines a Refinance/Modification and they report the results to HUD, they do not have to give a detailed reason or explanation; they can merely say that the â€œAPPLICANT WAS NOT QUALIFIEDâ€ or â€œTHE REQUIREMENTS WERE NOT SATISFIEDâ€. HUD has been blindly accepting these refusals as Gospel and has not looked into the details of what these phrases mean. The Bank does not have to justify anything, they do not have to explain themselves to anyone. When they decline an application; they do not have to give the Homeowner or the Government a reason.
In addition; the initial parameters for Fannie Mae were 80 to 105% of the Loan to Value ratio, which was ludicrous. With the recent extension, this figure has been increased to 125%, which means that if the property had DECREASED more than 25%, then the new loan will not cover it and therefore will not qualify. (Those of you who are Math Whizzes and Mortgage experts; please check me on this; itâ€™s confusing).
There is absolutely no incentive for the Banks to give away anything; particularly PRINCIPAL!
There are two conclusions which can be drawn from this;
1.) Donâ€™t expect to see a lot of Loan Modifications
2.) There should be a lot more investigation here.