Peteusa

Hello all!

I live in Phoeniz Az, and we had a house built in 2004. The cost of the house at that time was approx $160,000. The value of the house now is approx 82,000. We took on our mortgage for a 30 year period, and there were no agreements as to what the interest rate might rise to. We only paid about $4,000 at the outset, which was all that was required to move in. We now qualify in every way for the latest HARP 2 program, but I wondered if anyone else had gotten into this and got a satisfactory result.

I've looked at the HARP frequently asked questions, and it seems to imply that because I paid so little down when we moved in, it would be unlikely that I would get a reduction on the monthly payments we make. It does say however that I should save a lot in interest over the life of the loan, but the problem there is that I'll be over 90 when the loan period ends, with probably not a lot of time to spend the money I'd saved!

Anybody else had a similar experience, or can anybody offer advice in general about the HARP program? It almost seems to me that I'd be better to leave well alone!

Regards Pete.

MostlyYank

Hello Pete.

It's been a long time since I was a Real Estate agent, so I don't know the program, but I don't see the downside in trying and see what they offer. A buck's a buck, right?

Pete

scrubbedexpat099

If you are saving interest and paying the same monthly then you be paying off the loan much more quickly.

fatbrit

Gift horse, mouth, etc.

big_j

Generally, these programs are only available to people who cannot make their existing payments and are in default. If you're able to make (and are making) the loan payments, I don't think your lender will be able to make an adjustment.

For a definitive answer, you would need to contact your mortgage servicer. Different options apply depending upon which lender ultimately underwrote your mortgage (FNMA, FHLMC, etc. etc.).

Peteusa

Just to be clear; the HARP program was introduced about 12 months ago by Pres. Obama. The intention was to help people who are underwater regarding their property value, and owe twice as much as the property is now worth. The criteria is that you have to have good credit, be up to date with your payments, the mortgage must be with Fanny Mae or Freddie Mac, and falling on hard times like me also helps. I lost my job quite a while ago and am of the age where their wont be a mad rush to engage my services. I suspect this plan was thought up to stop people walking away from their underwater homes, as thousands have done, in Arizona anyway.

Bomjeito

I helped a friend of mine go through this in Vegas. He was with Bank of America. (You can only redo your mortgage with the originating lender.)

HARP only required BoA to refinance or restructure at the current lower rates if you are underwater and if the percentage of underwater to established comps to your neighborhood. In other words, we didn't need a professional assessment. But we did have to pay the mortgage application fee of something like $150 or so.

BoA also added second mortgage debt in the calculation. HARP isn't a pillow to relieve anyone's debt, nor will the bank take a hit on your refinancing. The HARP provision is simply the government requiring the bank/financing company to restructure your loan under certain requirements. Being underwater is one of them. If I recall, never having missed a mortgage payment is the other. The refinance also falls under the same requirements as any bank - they look at your credit rating, your other debts, etc. and they are NOT required to restructure your debt if you can't meet other mortgage lending requirements.

In the end, BoA refinanced the loan at a lower rate (shaved about .25% off the existing rate), which did bring down the mortgage payments about 20% per month. The main reason, however, the monthly nut went down was it was refinanced into a new 30 year fixed. And, as with all refinancing, the closing costs were about $5000. HARP doesn't eliminate ANY bank and mortgage fees.

I found the restructure simply a robbing the future to reduce today, as the new mortgage was a 30 year fixed. My friend had only 13 years left from the original 30 year fixed. Value-wise, I felt it didn't work out. But my friend couldn't make his mortgage payment anymore so the reduction gave him the ability to keep paying on a much less valued home than even when he bought it in 1992. So the refinance, to me, was simply a restructure to lay out those payments over a new 30 year period, which means MORE interest to BoA as well as that $5k closing costs tacked onto the existing mortgage principal. Ouch.

Folks in Phoenix and Las Vegas were very hard hit in this, even those who did not over buy or over leverage.

Talk to your lender - each case is very case-by-case in scenario.

ETA: We did this in Sept 2011.

Giantaxe

Why didn't your friend simply walk away from the property? I think that's what I would have done, even with the large hit to one's credit record. I think NV is a non-recourse state?

Peteusa

Thank you very much for that very helpfull reply.

As I said at the top, we only paid out about $4,000 when we 'bought' the house as a new build. I think it was at a time when banks gave mortgages out easily to a lot of people who in reality wouldnt have been able to afford it if there had been a substancial down payment. I know these days that approx 25% is required up front.

I'm not all that keen on paying the $5,000 or so fee for refinancing if I get into this. Thats nearly 4 months mortgage payment I'm parting with! I'm struggling a bit to decide how much better off I would be if I got into this, since I'm now 68. I honestly cant understand why people were allowed 30 year mortgages, when it was plainly evident that many of them, like me, might not live long enough for the house to be payed for! I assume they thought they'd always have the house to repossess, and never dreamed they'd get so many abandoned homes as they have.

Giantaxe

Most people don't stay in a house for anything like 30 years. I think the average length is something like 7 years.

MostlyYank

Not to sound morbid, but if you know you're going to outlive your mortgage I'd go for the lower payment.

Pete

fatbrit

My thoughts, too!

But you need someone neutral to go through all your finances and set a strategy.
http://www.housingaz.com/azcms/uploa...20Agencies.pdf

Bomjeito

As with all things like this, the reasons are personal and case by case to not simply abandon a home. But I'll share why there wasn't any reason to walk away.

My friend's mortgage was $1000 a month. He bought the home in 1992 - he wasn't even a part of the real estate boom. Due to his personal situation and the second mortgage, its technically underwater as he was able to get second mortgages based on the values that did balloon in the mid-2000s. Sure, that is his fault/problem. Now his mortgage is a tad under $800 for his own home. Why go rent for $800 for a smaller place and in a lesser neighborhood?

Salaries in Las Vegas have tumbled - many folks lives off tips, mind you. So his yearly income was reduced by more than a third but his mortgage stayed the same, of course. Not all people simply walk away and hope bankruptcy won't affect them. Especially when my friend is 60 years old and the mortgage will outlive him. He keeps his own home!

Another friend who DID buy in the boom did abandon the property and now struggles to make his rent which is the same amount of his mortgage payment was 3 years ago. Bankruptcy DID affect him; he can't get a credit card and with some casino positions (the ones that deal with money), a credit background check denies folks from these positions. He went from a higher cage management position to a floor position because of this. Abandoning properties and not worrying about bankruptcy is not exactly the best path for all people.

As for OP: talk to your lender about fees, etc. I was cheesed off about the smaller fees, but closing costs were based on value of property, etc. And all lenders do it differently...so just ask!