Ronald Reagan once said that the most dangerous words in the English language are “I’m from the government and I’m here to help.”
All too many homeowners learned the truth of that statement the hard way, after trusting the government sponsored Home Affordable Modification Program (HAMP) to help them keep their homes in the midst of the mortgage crisis.
As you’ll recall, back in 2009 President Obama promised to save 4 million homes through a loan modification program that would lower payments and in some cases, reduce loan balances. To date, about 900,000 have been helped – while far more have been harmed.
The program had no oversight, and the mortgage companies soon found a way to game the system to assure themselves greater profits. Although the government offered an incentive payment to lenders for doing loan modifications, there was a greater financial incentive for mortgage servicing companies in foreclosing than in modifying loans – especially when they could string homeowners along for months, getting them to make trial payments while their mortgage debt escalated.
Loan servicers were clearly and blatantly ignoring the rules that had been set down, but since there was no oversight and no penalty for non-compliance, so what? They used it as an opportunity to line their corporate pockets at the expense of distressed homeowners. Some Bank of America employees even testified that they were given bonuses and gifts for pushing homeowners into foreclosure while they were attempting loan modifications.
Even those few loan servicers who were taken to task over their misconduct were allowed to continue – and were paid their incentives.
For far too many homeowners, HAMP resulted in both emotional and financial devastation. Attempts to use it were the direct cause of many of the 5.6 million foreclosures we’ve seen since the housing bubble burst.
HARP might actually help – but some homeowners no longer trust
HARP stands for Home Affordable Refinancing Program, and it could save homeowners thousands. But after they witnessed what happened to friends and family under HAMP, many people are afraid to trust it.
So far, HARP has helped 3 million homeowners refinance – ¾ as many as HAMP was supposed to help.
But for the remaining 676,000 homeowners who are eligible for a lower interest loan, it’s one of those things that simply sounds too good to be true.
After all, if the bank is collecting 6.5% and you’re making your payments, why would they be willing to refinance your loan at 5% or less – especially without demanding hefty closing costs? And especially if your low credit scores would normally prevent you from getting a new loan?
It sounds too good to be true. Therefore, they doubt that it IS true.
So – why are they willing to give up 1.5% in interest?
Some say that HARP refinancing reduces the potential for future defaults. They also say that the government thinks it will help the economy. If all 676,000 homeowners who are eligible for HARP were to refinance, it would free up $1.6 billion per year that would theoretically be pumped back into the economy in other expenditures.
That’s the government’s reason.
I expect the lender’s reason is that there are substantial financial rewards for those banks who grant their customers lower interest rates. In other words, we taxpayers are probably footing the bill.
Ever hear of redistribution of wealth?
Before you reject the idea of refinancing…
Get in touch. Your equity position and credit rating may have improved enough for you to refinance without using HARP.
It costs nothing to find out, so call us at 800-223-7409or click here to fill out an online application.
Mike Clover
Mortgage Banker
Homewood Mortgage, LLC
Toll FREE: 1-800-223-7409
O: 469-438-5587
F: 972-767-4370
NMLS# 234770
18170 Dallas Pkwy
Ste.304
Dallas, TX 75287
Web: www.mikeclover.com
