( An article from Colin Robertson of TheTruthAboutMortgage.com dated May 11, 2015 )
Since being introduced back in 2009, both and the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) have helped millions either avoid foreclosure and/or save money on monthly mortgage payments.
Both programs have been deemed pretty successful, though the numbers did fall short of original projections (as everyone probably expected) despite several annual extensions. I think the original estimate was nine million.
HAMP Is Finished at the End of 2016
Since HAMP was launched in the spring of 2009, a total of about 1.5 million homeowners have received permanent loan modifications through the fourth quarter of 2014.
Nearly 2.3 million trial modifications were started but fewer than one million are permanent and still active either because of a positive outcome such as loan payoff or alternative modification, or because of something negative like a short sale or foreclosure.
This has resulted in aggregate savings of approximately $32.7 billion compared with prior unmodified mortgage obligations.
The goal of HAMP is to get the borrower’s front-end DTI ratio down to 31% by reducing the interest rate, extending the loan term, and potentially forgiving principal.
About 95% of HAMP loans received an interest rate reduction, though those are temporary and subject to rise.
Just over 60% of HAMP borrowers received a term extension and less than a third (30.3%) received principal forbearance.
HARP Probably Done After 2016
The Home Affordable Refinance Program (HARP) is a program that allows underwater borrowers with Fannie Mae- and Freddie Mac-backed mortgages to refinance to take advantage of lower interest rates.
It originally allowed borrowers to refinance with LTVs as high as 105%, but that number was later increased to 125% and eventually the cap was removed entirely for most types of loans.
Over the years there were pleas to expand the program and open it up to borrowers with non-agency mortgages (remember HARP 3), but those demands fell on deaf ears.
To date, roughly 3.3 million borrowers have taken advantage of the program, though the numbers have been waning lately. Around 10,000 borrowers are refinancing monthly via HARP nowadays.
This is not unexpected given the fact that most have already applied for assistance under the program or no longer need it thanks to rising home prices.
During FHFA director Mel Watt’s speech at the Greenlining Institute 22nd Annual Economic Summit last Friday, he spoke about both programs and revealed that HAMP would be finished after one final extension through the end of 2016.
Since March 2013, Fannie and Freddie have also offered a proprietary Streamlined Modification that requires less paperwork than HAMP, and this could serve as an ongoing loss mitigation solution for borrowers.
As far as HARP goes, he said “we anticipate that this will also be the final extension for HARP.”
Apparently some 600,000 plus borrowers could still benefit from HARP though they’ve yet to come forward for one reason or another.
Watt said the FHFA will use the next year and a half “to explore possible streamlined refinance solutions for future Enterprise loans,” so there might be some kind of permanent HARP solution for Fannie and Freddie loans that “might apply in a non-crisis environment.” ( End of Colin’s article.)
From Bob Phillips: Over the past couple of years, local house prices have risen substantially, which may help in two different ways. First, former underwater homeowners may now actually have some equity, hopefully allowing a little breathing room.
Second, owners having difficulty making their payments on a loan that has a high interest rate, may, in fact, be able to refinance now, where they couldn’t before, staying in their home with a lower payment, OR, they may now be able to sell their home without going through a short sale, getting themselves out from under a terrible loan that they’ve been living with, for years.
Even if the home is STILL underwater, solutions have become easier to accomplish, if you’re dealing with an agent who has both training and experience, in dealing with distressed loan situations. I, Bob Phillips, have both the training, and the experience, to help you sort out the many options you might have.
If you – or someone you know – is still having difficulty making their house payments, please consider calling me at (949) 887-5305, or shoot me an email to BobPhillipsRE@gmail.com.
By Colin Robertson of TheTruthAboutMortgage.com, 5/6/15
While foreclosures might sound like old news, there are still a ton of borrowers either behind on mortgage payments or in the process of foreclosure.
And it doesn’t appear as if the type of loan they took out was the problem. It’s just the fact that they took out their loan at exactly the wrong time.
And by that, I mean most borrowers facing foreclosure these days are underwater on their mortgages, and deeply underwater at that, possibly because they purchased homes at the height of the market.
That brings us to a new report from Black Knight Financial Services, which revealed that borrowers in negative equity positions accounted for 77% of all active foreclosures, per their latest Mortgage Monitor for the month of March.
So while some might just be having trouble with monthly payments because of a job loss or an illness, or simply because they took on too much mortgage, most are behind because their property values are in the red.
It might be conjecture to say that, but it’s clear there’s little incentive to keep paying an underwater mortgage, especially if it’s still underwater after all the recent home price gains.
Put simply, it makes sense that 29% of underwater borrowers are seriously delinquent on their mortgages.
Cheaper Homes 9X More Likely to Be Underwater
Black Knight also found that borrowers who own the bottom 20 percent of homes by price are nine times more likely to be underwater when compared to those in the top 20 percentile.
In other words, high-end homes have largely avoided the negative equity crisis that has plagued the rest of the market.
This could be a combination of higher down payments, more affluent borrowers, and better performance (rebounding) of higher-end homes.
Overall, their data show that slightly more than eight percent of all borrowers are currently underwater on their mortgages.
The good news is we’ve seen a near-30% decline in the negative equity rate from a year earlier.
The bad news is one of every three borrowers currently in the process foreclosure has a loan-to-value ratio of 150% or more.
For the record, Nevada and Florida continue to lead the country in terms of negative equity rates, with 16.4% and 15.1% of borrowers underwater, respectively.
And Florida and California have the highest number of underwater properties.
Mortgage Delinquencies See Largest Drop in Nine Years
The mortgage delinquency rate has also improved immensely, and though seasonal declines are typical in March, the 12.18% drop seen this year was the largest monthly decline in nearly a decade.
Additionally, declines have been witnessed in all stages of delinquency (30, 60, 90 and 120+ day lates).
In fact, 30-day delinquencies hit their lowest level in over 10 years. And for every 10,000 loans that were current at the end of February, just 73 missed a payment in March, the lowest current-to-30 day late roll rate in over 15 years.
Roll rates from 30-to-60 and 60-to-90 days delinquent also fell to their lowest levels in nine years, and loans that were previously delinquent are curing (becoming current again) at the highest clip since 2005.
So while underwater loans persist, new problem loans seem to be few and far between.
Separately, the MBA reported today that the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 5.54% as of the end of the first quarter.
This is the lowest recorded rate since the second quarter of 2007.
Meanwhile, just 2.22% of loans were in some stage of foreclosure, down from 2.65% a year earlier, the lowest foreclosure inventory rate since the fourth quarter of 2007.
So it looks as if things are nearly back to normal, though certain areas of the country continue to suffer disproportionately.
The scary part is that NAR thinks home prices are overvalued again, but if prices dip again negative equity-related problems could resurface. ( End of Colin’s article.)
From Bob Phillips: If you, or someone you know, is having difficulty making your mortgage payments, I, Bob Phillips, am both highly trained and well experienced in helping homeowners come up with solutions to such problems. Give me a call today, and let’s find a solution together. There is no charge for this assistance. Call now! Bob Phillips, 949-887-5305