HAUP offers unemployed homeowners who are unable to make their monthly mortgage payments a few extra months to get back on their feet while looking for employment. Homeowners are eligible if they:
(1) Are unemployed;
(2) Live in the mortgaged premises (meaning the property is their primary residence);
(3) Have a first lien mortgage originated on or before January 1, 2009; AND
(4) Have an unpaid principal balance less than or equal to $729,750.10.
Homeowners that qualify will have their mortgage payments suspended for up to three months (or until they are employed). Homeowners that find a job while on the program will be considered for the Home Affordable Modification Program. If the homeowner does not find a job they will be considered for the Home Affordable Modification program 30 days prior to the completion of the Unemployment Program forbearance plan.
HAUP does not cancel any mortgage payments, it merely suspends such payments. Homeowners that successfully complete the program will resume normal payments once the plan ends.
Wednesday, August 25, 2010
Home Affordable Refinance Program (HARP)
A refinance can perform a number of different functions. It can be used to consolidate debt, pull equity out of one's home, obtain a mortgage with a lower rate, change from adjustable to fixed, etc. Typically as interest rates drop the economy experiences a influx of refinances. Currently we have low interest rates but few refinances because many homes are "upside down". This means that the homeowner owes more on that property than the property is worth. HARP is the governments solution to this problem.
When a homeowner owes more on a property than what it is worth the homeowner is typically unable to find a bank that would give them a new mortgage. Here's an illustration of why this situation doesn't lend itself to refinancing:
John owns his home and owes $500,000 on the premises. The property is worth $300,000. His original mortgage is with Bank A and he'd like to refinance with Bank B. In a refinance Bank B would pay Bank A for the entire amount due (here $500,000) and John would then owe Bank B the value of his property, therefore giving him a new mortgage. In this situation Bank B would pay $500,000 to satisfy John's mortgage with Bank A and then receive a new mortgage from John of $300,000. Clearly Bank B is losing too much money. Therefore John would need to pay Bank B $200,000. In today's economy people like John don't have excess capital sitting around and therefore they are having problem taking advantage of lower rates.
The government's solution to this problem is called HARP (Home Affordable Refinance Program). A person may be eligible for HARP if they:
(1) Own a one-to-four unit home as a primary residence;
(2) Have a mortgage owned by Fannie Mae or Freddie Mac;
(3) Are current with their mortgage;
(4) Have not been late on the mortgage within the past 12 months;
(5) Have a first mortgage not exceeding 125% of the current market value of the home;
(6) Have income sufficient to support the new mortgage payments; AND
(7) Can improve the long-term affordability of the loan with the refinance.
Note that this allows homeowners with a second mortgage to refinance so long as the first mortgage does not exceed 125% of the current market value of the home. In addition, the homeowner does not need to actually live in the home. This is the first government program to allow refinancing for vacation and investment properties.
This program differs from typical refinancing because the homeowner cannot take cash out from the refinance and because the homeowner must be current on their mortgage.
Refinancing your home loan is not an easy process. If you would like more information on HARP or any other type of refinance/modification program feel free to email me at AFriedma@PulversThompson.com.
When a homeowner owes more on a property than what it is worth the homeowner is typically unable to find a bank that would give them a new mortgage. Here's an illustration of why this situation doesn't lend itself to refinancing:
John owns his home and owes $500,000 on the premises. The property is worth $300,000. His original mortgage is with Bank A and he'd like to refinance with Bank B. In a refinance Bank B would pay Bank A for the entire amount due (here $500,000) and John would then owe Bank B the value of his property, therefore giving him a new mortgage. In this situation Bank B would pay $500,000 to satisfy John's mortgage with Bank A and then receive a new mortgage from John of $300,000. Clearly Bank B is losing too much money. Therefore John would need to pay Bank B $200,000. In today's economy people like John don't have excess capital sitting around and therefore they are having problem taking advantage of lower rates.
The government's solution to this problem is called HARP (Home Affordable Refinance Program). A person may be eligible for HARP if they:
(1) Own a one-to-four unit home as a primary residence;
(2) Have a mortgage owned by Fannie Mae or Freddie Mac;
(3) Are current with their mortgage;
(4) Have not been late on the mortgage within the past 12 months;
(5) Have a first mortgage not exceeding 125% of the current market value of the home;
(6) Have income sufficient to support the new mortgage payments; AND
(7) Can improve the long-term affordability of the loan with the refinance.
Note that this allows homeowners with a second mortgage to refinance so long as the first mortgage does not exceed 125% of the current market value of the home. In addition, the homeowner does not need to actually live in the home. This is the first government program to allow refinancing for vacation and investment properties.
This program differs from typical refinancing because the homeowner cannot take cash out from the refinance and because the homeowner must be current on their mortgage.
Refinancing your home loan is not an easy process. If you would like more information on HARP or any other type of refinance/modification program feel free to email me at AFriedma@PulversThompson.com.
Saturday, August 14, 2010
HAMP v. In-House Mod
A bank needs to put any HAMP eligible loan through a HAMP modification review prior to successfully foreclosing on any residential property. This is both good and bad. It's good because it gives the courts the power to slow down a foreclosure until they're certain the bank has reviewed a person's unique situation for a HAMP mod. It's bad because HAMP is a slow, drawn out process. While a homeowner is under review for a modification missed payments, interest and attorneys fees can still be added to the total amount due on the mortgage. The more that is owed on the mortgage the more difficult it is to get modified.
Time Before Response
HAMP mods require the bank to follow government created guidelines before offering the modification. In-House mods vary by bank but instead of requiring the extensive paperwork necessary for a HAMP mod an In-House mod may require very little paperwork. I've seen a few In-House mods that were actually "blind" meaning without any paperwork.
How the Modification is Structured
HAMP mods are required to be as close as possible to 31% of the household's pre tax income. The net present value of that loan is then compared to the net present value of the foreclosure. The bank is permitted to do whichever one has a higher net present value. In-House mods follow no set structure. Since they cost less to offer (less employee time and lawyer time spent on the loan) banks are quicker to offer them and sometimes offer better deals than the homeowner would receive under HAMP.
Reaching Permanent Status
HAMP trial mods come with a 3 month trial period. At the end of the trial period homeowners must resubmit certain documents prior to the loan going Permanent. Sometimes this can take months other times it can be quick. In-House mods are almost always (99% of the time) Permanent instantly. There is no trial plan period.
Documents Required
HAMP mods always require the following: Financial Worksheet, Hardship Affidavit, Bank Statements, Pay Stubs or Profit and Loss Statement, 4506-T and Tax Returns. You may also be required to submit proof of rental income, proof of occupancy and a number of other government required documents. As with any government program there is a lot of paperwork. In-house mods can require nothing and can require everything listed above for HAMP mods. They're not part of a government program and therefore the bank can make their own requirements.
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