The Times West Virginian

Business

May 18, 2014

Home Affordable Refinance Program can provide substantial savings

FAIRMONT — Financial institutions are encouraging homeowners to take advantage of the federal Home Affordable Refinance Program, known as HARP, which can provide pretty substantial savings for families.

The more people who know about this national program, the better, said Jay Plum, executive vice president for consumer and mortgage lending for Huntington National Bank. He is based out of the company’s headquarters in Columbus, Ohio.

Plum explained that during the financial crisis, a program was created to help borrowers who had financial difficulties. Over time, Fannie Mae and Freddie Mac entities recognized that there were a lot of other struggling customers who had paid their mortgage bills but weren’t able to take advantage of the lower interest rates and refinance because a program wasn’t available to them.

As a result, in 2009 the Federal Housing Finance Agency, or FHFA, created HARP, which is part of the Making Home Affordable Program. HARP is for loans owned by Fannie Mae and Freddie Mac that were created on or before May 31, 2009, www.harp.gov reports.

According to the website, the program is designed for people “who are current on their mortgage payments, but who are underwater on their mortgages. That is, they owe almost as much or more than the current value of their homes.”

The program stipulates that a homeowner’s loan-to-value ratio has to be more than 80 percent to qualify.

News releases from FHFA say that in 2013 the deadline for HARP was extended to Dec. 31, 2015, and FHFA has focused on efforts to inform homeowners that are eligible and stimulate more participation in the program. FHFA strives to prevent foreclosures and maintain credit availability for refinances.

The FHFA’s latest Refinance Report, for February 2014, shows that 3.1 million HARP refinances had been completed since April of 2009, including 5,740 HARP refinances in West Virginia.

On May 13 of this year, FHFA Director Melvin Watt mentioned HARP during his remarks at the Brookings Institution Forum on the Future of Fannie Mae and Freddie Mac.

He said, “We have also received a number of inquiries about changing the eligibility requirements for the Home Affordable Refinance Program (HARP). Because the number of borrowers we could add by extending the eligibility date or by changing performance requirements is relatively small, we have decided not to alter HARP eligibility parameters.

“FHFA is, however, working to retarget our HARP outreach efforts to the approximately 750,000 borrowers who already qualify and would financially benefit from refinancing. We are exploring outreach efforts designed to gain the trust of these ‘in-the-money’ borrowers so they act in their own financial interest.”

Plum said HARP is designed to help customers who, due to no fault of their own, saw their property value decline and were unable to refinance. The program has done very well, giving several million customers the ability to take advantage of the low interest rate environment.

“These are folks who have always paid their bills … but may have lived in a place where property values dipped a bit and as a result couldn’t qualify (for refinancing),” he said.

People with loans that originated within the established time frame are able to refinance without having to worry about their property value, because in most cases, an appraisal is not needed. It’s just a matter of the homeowner going through the guidelines, Plum said.

“This is not a traditional mortgage,” he said. “There is limited paperwork required, and it’s a pretty easy process.”

Persons need to prove that they are employed, and their income will be verified. As long as individuals have stayed current with paying their mortgage, they will most likely be able to refinance through HARP.

“Each lender has a few other guidelines,” Plum said. “Odds are, if they meet all those criteria, they’ll have options on refinancing their loans.”

Most banks are offering HARP, and he encouraged people to talk to their lender to see what alternatives are available to them.

In the last few years, the interest rates have been some of the lowest that the country has ever seen. While the rates this year are higher than last year, they are still incredibly good, as people are able to borrow money at between 4 percent and 5 percent interest. Now is the time for people to look at refinancing through HARP, Plum said.

He said Huntington Bank has sent direct mail to clients in its six-state footprint — West Virginia, Ohio, Michigan, Pennsylvania, Indiana and Kentucky — who haven’t taken advantage of the program yet and is trying to talk about the benefits more. Some people remain a bit nervous following the financial crisis.

“I think folks are still a little skeptical that the offer might be too good to be true,” Plum said. “Folks have the perception that the mortgage process is very difficult. It’s not in this process.”

 William Eiler, vice president of regional public relations for Huntington Bank, added that the company is always encouraging customers to develop strong relationships with their bankers. Whether people are clients of Huntington Bank or not, it’s always good to talk about the fears they may have related to HARP.

“If it saves you a lot of money in the long run, it certainly will be well worth your time to explore that,” he said of HARP. “It affects everyone. It’s not just our six states. It’s other banks and other states.”

Russell Bonasso, a mortgage banker for JPMorgan Chase & Co. who covers several branches in the Charleston area, has worked with quite a few homeowners on HARP loans. In fact, Bonasso just locked a HARP loan last week for a borrower.

“It’s a great program,” he said. “The nice part about HARP is it is a streamlined process for doing loans.”

HARP offers many benefits. For instance, this program reduces the paperwork for someone who wants to refinance their existing mortgage. The financial institution can still do the refinancing if the value of the individual’s home has gone down, even if more may be owed than what the house is now worth, Bonasso said.

In addition, there aren’t necessarily credit score requirements or the same income or asset requirements as traditional mortgages, he said. Also, an appraisal wouldn’t necessarily be required if Chase has the appraised value in its system.

Bonasso said the biggest stipulation is that homeowners need to be up to date on their loan payments.

He commented that the word has gotten out really well about HARP in the last couple of years, and there was a point when interested people were calling constantly to find out more information. He has recently seen the HARP activity slow down some because interest rates have gone up a little bit.

Sometimes people are unfamiliar with HARP, but learn about the program when they call to ask questions about interest rates, Bonasso said.

The system at Chase notifies him when customers are eligible for HARP, and he reaches out to them about the available options. If Chase sees customers who currently have a higher interest rate on their mortgage and could benefit from HARP, it tries to help.

Bonasso said customers are very appreciate that the bank is proactive like this.

In addition to a decreased interest rate for mortgages, the program can also allow people to change from a 30-year loan to a 15-year loan and save all kinds of interest in the process, he said.

“If you’re not sure if you qualify, it never hurts to pick up the phone and call your lender who you have your loan with, because you just don’t know,” Bonasso said.

Email Jessica Borders at jborders@timeswv.com or follow her on Twitter @JBordersTWV.

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