Skip to comments.Harp Playing for Obama New-Old Home Program
Posted on 11/21/2011 11:05:30 AM PST by Kaslin
Obama has less than one year to boost his ratings, and the latest housing bail-out plan is part of his campaign. But will it work in the long run? Lets take a look.
HARP 2.0 (Home Affordable Refinance Program) launched this week with the hopes of helping at least 1 million underwater borrowers refinance into todays low rates, even if they owe much more on their home than its currently worth.
While the rules are less stringent than the original not-so-effective HARP program, it still wont save enough underwater homeowners from losing their homes.
1). It only applies to primary residences, not second homes or investment properties.
2). It only applies to borrowers whose loans are held by Fannie Mae or Freddie Mac.
3). The loans must have been sold to Fannie or Freddie before April 1, 2009.
4). No late payments in the last 6 months, and only 1 late payment in the last year.
5). Adjustable rate or 40 year mortgages are limited to 105% LTVs.
So who will it help?
1). LTVs (loan to values) have been lifted for those with 15 or 30 year fixed mortgages. It used to cap at 125% of value, but now borrowers can refinance no matter how upside down they are (unless they have an ARM or 40 year mortgage).
2). Since the program has been extended until Dec. 31, 2013, those who have had late payments can get back on track and still be able to qualify.
3). The waiting period has been lifted for those who have had a recent bankruptcy or foreclosure.
It looks like the banks will also get help.
HARP 2.0. now waives the required lender representations and warrants for both the loan that is being refinanced and the new loan that is being originated. This means that when lenders refinance loans through HARP 2.0, they are free of any legal obligations to the old or the new loan. (Borrowers, make sure you read the fine print!)
So lets get this straight. Fannie and Freddie are backing a bunch of upside-down mortgages. They figure if they can get banks to lower the payments, the risk of default lessens. They encourage the banks to go along with the plan by letting them walk away from potential liabilities on those loans.
So, as long as the government is giving out freebies, wont the borrower want to walk away from some of that liability as well?
Less than 1 million out of an expected 4-5 million homeowners successfully refinanced through the original HARP program. Will the 2.0 version fare any better? I dont think so and heres why:
Of the few who actually qualify, how many will choose a lower payment on an upside down mortgage over simply walking away from the debt all together? Remember, Fannie Mae and Freddie Mac will allow those same borrowers to qualify for a new mortgage in three years.
The government makes it pretty easy to walk away from responsibilities in the U.S. - both for banks and borrowers. In some countries, like Australia, you are expected to pay back what you borrowed and banks are expected to act responsibly.
Bottomline: more government intervention creates less personal responsibility.
Who gets stuck with the bag? The responsible, of course. After all, Fannie Mae and Freddie Mac are supported by the tax payer. Its the taxpayer who once again gets to bail out the banks and borrowers when government-backed loans go bad.
This guy writes about HARP and the other government and PROPOSED government programs on Zero Hedge:
So.... loans to people who could not afford it in the first place will be replaced by loans people can not afford but with lower payments?
Will see the 100 year mortgage??
Loans to people who could not afford it in the first place. Now the loan is to the same individual whose colateral has tanked. Who in their right mind would go further in debt on something that is not worth the amount of the debt???? Worst of all is it is OUR TAX MONEY that is paying these loans.