HARP Refinancing: Eligible Underwater Borrowers are Saying 'No Thanks'

HARP Refinancing: Eligible Underwater Borrowers are Saying 'No Thanks' If you own a home and are even slightly in negative equity, meaning you owe more on mortgages than your home is worth, you have probably received a mailer pushing a “HARP” refinancing opportunity.
But many jaded homeowners, some rightfully distrustful of loan offers, are missing out on HARP’s unique opportunity for underwater borrowers – a chance to refinance into historically low mortgage rates which may not stay so low by year’s end.
In the February 25, 2013 issue of Fortune, Becky Quick writes that only about 25 percent of the homeowners who qualify for HARP actually end up refinancing, according to Quicken.
Most of the rest are turning down the offer. Quick rightfully called this a shame.
HARP, which stands for Home Affordable Refinance Program, was launched by the Obama Administration in 2009, but it didn’t gain steam until spring of last year. The program kicked into high gear in May for borrowers whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac. The new, so-called HARP 2.0 reduced legal liabilities for lenders and eliminated the 125 percent loan-to-value cap on on eligible mortgages.
The new HARP now accounts for about a quarter of total refinance volume.
HARP is a bona fide opportunity because it targets underwater borrowers who would not be able to refinance otherwise. For many homeowners, the program ends up saving them hundreds of dollars a month.
Homeowners who have been paying on time, but are in negative equity, can take advantage of historical long-term rates that have stayed in the 3.5 percent range for months.
In his State of the Union address, President Obama this week pushed for expanded refinancing for underwater borrowers whose mortgages are not held by Fannie and Freddie, the financing companies that own or back 60 percent of U.S. home loans. Essentially, Obama is pushing Congress to create HARP 3.0, expanding the opportunity hundreds of thousands of underwater borrowers.
But the cold truth is that many who are currently eligibly are saying no to HARP.
In Quick’s article, Quicken’s Lisa Price recounts her HARP offer to a homeowner was paying a rate of 6.616 percent on his $435,000 mortgage, with 25 years left to go. Price, a mortgage banker for Quicken Loans, offered to refinance the loan at 4.125 percent, keeping the 25-year payout time period. The deal would have reduced his monthly payments down to $3,383, a savings of $630 a month.
The homeowner said no.
“It didn’t make any sense,” said a stunned Price, about the rejection. “Usually when I call someone with a deal like that they’re really excited.”

2 thoughts on “HARP Refinancing: Eligible Underwater Borrowers are Saying 'No Thanks'

  • February 17, 2013 at 11:44 am
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    I was waiting for you to finish the story. Some comment about how Price then realized how much distrust homeowners must have of lenders. The reality is that responsible people are afraid of being swindled and becoming another statistic. Like the woman who meets a great guy, but turns down his overtures because “he seems like a player”. Of course the guy who had 6.6% loan on $435K mortgage is going to say no to you because he thinks of himself as a shrewd homeowner. He would have had to be pretty shrewd to get 6.6% on $435K a decade ago. The key is that the homeowners who would be helped by 3.0 are much more savy today than 5 years ago or when they bought their homes. And since non-GSE loans are backed by banks and “familiar faces” like Wells Fargo (not strangers on dry-calls), homeowners are going to be much more receptive. In fact, I have already spoken to my bank and they are looking forward to 3.0 passing and have stacks of qualified homeowners applications just waiting for 3.0 to pass.

  • March 4, 2013 at 8:37 am
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    I’m one of those homeowners that said “No.” to Harp 2.0, and a distrust of loan officers was not even remotely part of my decision. The stunned loan officer probably didn’t tell Becky Quick that they were charging ridiculously high fees and higher rates than necessary to that homeowner, way too high to make it a financially responsible decision to refinance. What good is it to lower your payment if you are paying them thousands of dollars for the privilege while adding years back onto your loan? Also, they say, No appraisal, but then they tell you that you, unfortunately, must pay for an expensive appraisal (like $450 or so) because of some quirk in the system, and, Oh, by the way, if the appraisal comes back underneath a certain range, we will be raising your rates and points even higher (and this is after already being quoted a higher rate than a standard 30-year). No, thank you. We would have done it in a heartbeat had the fees been structured more like the FHA Streamline, a truly low rate with a funding fee of .01% and actually, really no appraisal. I’d love to refinance, but I’m not desperate. These banks are treating us like we’re idiots willing to pay a fortune just to save a few hundred dollars a month.

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