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Making Home Affordable Update -- FAQs

By James Wirth

Services for Real Estate Pros

May 12, 2009 12:42 PM

I have received a lot of feedback on my original posting entitled "The Home Affordability Refinance Program." You can read the original post and comments here. The goal of my original posting was to provide information regarding the newly announced "Making Home Affordable Program." Here' s a quick review:

The program has two components: the modification program -- designed to reduce the monthly payment of struggling homeowners to a more affordable level to keep them in their homes; and The refinance program -- designed to allow homeowners to refinance into a lower rate who are not able to qualify otherwise because of a loss of equity due to lower values.

There is still a lot of confusion about the details of the programs, so I've compiled a list of Frequently Asked Questions based on comments and feedback I've received since my original post. I hope this will offer some clarity and ease the pain of trying to sift through the details.

Q: The makinghomeaffordable.gov Web site says I may be eligible, but my lender says I am not. Who is right and how do I fight this?

A: A caveat to the results of the 'quiz' on the makinghomeaffordable.gov Web site is that you must check with your loan servicer (the company you make your house payments to) to find out if you are eligible. This is a crucial point because of two issues: 1) There are a number of clarification points the short quiz doesn't take into consideration; and 2) The loan servicer may be applying a second set of internal qualifying requirements on top of what the government guidelines require. We are definitely seeing this on the refinance program, and I believe it's happening on the modification program as well.

Q: It seems that I qualify for everything on the programs except for the way I qualified when I bought my home: on a stated income program. Why would this disqualify me?

A: Unfortunately the program limits participation by those who used a "Stated Income" loan to qualify for their existing home loan. I went a bit overboard on a rant about this in a separate posting, which you can read here. Suffice it to say that I see this as one of the biggest issues with this program and hope they address this. But for now this is an issue.

Q: I contacted my lender about a loan modification because my income has been reduced substantially but they told me I did not qualify because I am current on my payment. Why am I being punished for being responsible?

A: The way I read the modification program, being delinquent on your house payment is not a prerequisite for qualifying; however, I have heard from many people that their lender will not consider a modification for them, that their only option is a refinance and that has typical income qualifying guidelines. So the person hoping to qualify for the modification is typically not the same person hoping to qualify for the refinance, which is limited to reducing the interest rate -- more or less.

Recommendation: Stay with it. If you are in danger of becoming late or are already late on your monthly payments, contact a HUD counselor immediately by calling 1-888-995-HOPE. Stay in communication with your loan servicer. Even considering talking to your State Attorney General and talking to your state's congressional representatives. There is clearly a high level of resistance to implementing these programs. Making your voice heard!

Other entries on this subject:
Original: The Home Affordability Refinance Program posted 3/04/09
Update: Making Home Affordable Part II posted 3/30/09
Rant: Don't disqualify someone because they had a stated income loan! posted 4/16/09

I will continue to add FAQs to this post. Comments are welcome! --James Wirth

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Anonymous

Angie Denes

Amazing....just now learning about all of this because like you....I have not been late with my payment. Citimortgage doesn't seem to know anything about HARP...only HAMP. HARP would be better for my family. Is there going to be a list out soon that tells you wich companies are doing HARP?

The funny thing is....my house has been on the market for a year. We cannot refi for 6 months because of that. Guess they would rather see us forclose ....makes no sense at all. Also FYI, if you are late on your house payment...even one time....you may not get refinanced if you decide to move and you could be homeless. This rule applys for one year before you close.

May 13, 2009 08:57 AM

James Wirth

Everett, WA

Hi Angie, thanks for the comment. There are a number of probibitive components to both the modification and refinance programs. The best thing we can do is voice our opinions about this and hopefully affect positive change.

In response to your question -- if your loan is owned by Fannie Mae, a number of lenders can refinance it (including myself). If it's a Freddie Mac loan, only your existing servicer can initiate the refinance. But as you said, it does need to be off the market for 6 months. And that really baffles me -- why punish someone for trying to sell their house instead of foreclose when they were struggling with the payment?

Hopefully we'll work through this and come out with a HARP 2.0. --James Wirth

May 13, 2009 12:23 PM

Clinton Ramsey

I have a Fannie Mae mortgage that was being serviced by Countrywide now Bank of America. I had a substantial loss of income more than half. I have been consulting BoA since I first heard of the modification program in Feb. I have sent them information, updated that information and called back again. All I get is double talk. You can't even contact the supposed team that is supposedly implementing the Home Affordabilty Modification Plan. The most I can get out of them is that someone will contact you once the evaluation is finished if you qualify. According to the .gov website I qualify. Meanwhile they have told me that I can refinance but there may be a problem with the home value as I don't have any equity. All I need is cash and then they can get me a payment that is 200.00 cheaper. That doesn't help. I don't think the bank has a reason to modify unless you have shown that you are delinquent and heading toward forclosure. They would have to reduce my interest rate 5% to get to the 31% guideline. Most recently I have fallen 2 weeks behind. Are they going to wait until I am monthes delinquent? Is that the game?

May 28, 2009 01:42 PM

Clinton, you're not alone in your frustration -- many people have expressed the same frustration and the same run-around. Ironically it's most often with Countrywide/BofA that they're getting this treatment.

At this point lenders are still trying to implement the new guidelines and the government has been slow to step in and force their hand. Unforunately, those that are behind on their payments seem to be getting the most attention.

I would stay on them. You might also call the Hope Hotline at 1-888-995-HOPE. It's a free service and they can discuss your options with you.

Best of luck -- James Wirth

May 28, 2009 06:11 PM

Ziggy

So if HARM needs there to be a stated income original mortgage in order to qualify (and I don't see that in the government description of the program), why do they say recent tax return required (as opposed to W2, paystubs) as this implies self employed people, who would often have used a no doc loan for the original mortgage? Ot is this a bank 'after requirement'?

Then there is the question as to if they (they being the servicer) go back and compare (if they can find the original loan app after all the securitization) the original mortgage app stated income and the tax return income at the time. If there is a big discrepancy do they refuse or worse, prosecute?

It's further complicated because the question for the original app is what is your current income. for an as yet incomplete business year.

May 30, 2009 02:47 AM

Hi Ziggy, my understanding is that the original loan cannot be a stated income loan. It doesn't sound like there's any comparison, etc., they are just ruling them out altogether. This is extremely unfair in my view, and I hope they revise this. At this point though, they're really just focused on getting the programs fully off the ground. Hopefully we'll reach that point soon and they can start making sense of the areas that currently don't.

Thanks for the comment -- James

Jun 01, 2009 05:12 AM

Thanks James although I see I made a mistake in my original post. I said "If HARM needs there to be a stated income loan" -I meant of course to say "If HARM doesn't apply when there is a stated income loan", why do they mention tax returns for where there are no paystubs or W2s as this would imply self employed people and they were the people who made a lot of use of stated income loans

Jun 02, 2009 06:49 AM

Bruce

I have been qualified by my first mortgage company for refinancing under HASP. I have completed my application and new loan documents generated, but my second lien holder will not subordinate unless I provide all required documents for subordination under their terms and requirements. Their terms are based on a standard refinance and there are no exceptions (including under HASP). Plus they require a 100.00 non refundable fee.

My first mortgage holder tells me that some of the documents they are reguesting will not be generated under HASP. Also under HASP it is my responsibility to get my second lien holder to subordinate. I am now stuck and do not know what to do. Will requirements to subordination change under HASP?

Jun 12, 2009 01:42 AM

Making Home Affordable Update -- FAQs

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