HARP is now obsolete and has been replaced by HARP 2.0.

Hmmmm....what is this?  A new software, a fancy coffee/latte maker, or worse yet another government band-aid?! The “Administration” is supposedly all about helping the American people, but does this truly help, or just bring more hardship down the line?

First, you must not be delinquent on your mortgage. You must be able to qualify just as you would for a typical mortgage, i.e., income, credit, debts, etc. You must be asking what is the point, right? HARP 2.0 is for homeowners who meet the above, but are upside down in their home value vs. their mortgage. This sounds like a dream-come-true if you wish to keep your home and meet the eligibility criteria.

Let’s look at this example….

You owe $400K on your home and it’s presently worth $200K. Real estate values are not going to sky rocket up anytime soon, so chances are VERY HIGH that your home will still be close to $200K, okay maybe $210K, within the next couple years. So, why wouldn’t you liquidate now via short sale, wait two years (that’s right…just two) to qualify for a new loan, buy a new home (or perhaps a better home) similar to your previous house at current value? Doesn’t this seem like a “no brainer” idea? Or, is it just me?

This is a business decision, no doubt. Some will have an “A ha” moment and others will prefer to stay in their home for many different reasons, or may not qualify for HARP 2.0.

However, let’s look at another example, as in values.

If you owe $400K, but it’s worth $200K or even $300K, how long will it take for the market to come up to that value, in order to justify staying in the home? Well, my crystal ball is cloudy today, but I’d say you can plan on 10+ years. WHAT?! Yes, 10 or more years….maybe 15. However, your neighbor decided against the HARP 2.0 program and chose to short sale his home, buy 2 years later and is sitting back watching his value rise. He is going to be dancing all the way to the bank with the increase in values because while your home may take 10-15 years to reach what you owe, his will have a lower balance, but a higher value….which equals a much better investment and a greater return should he decide to sell.

Let’s also look at what type of loan this will become should you choose it. When you originally purchased your home your loan is considered a “purchase money loan” which has no recourse in the state of California. However, when you choose to refinance, even through the HARP 2.0 program, that new loan is now considered a recourse loan. This means that if you have financial difficulty in the future and wish to short sale or you unfortunately lose your home to foreclosure, the lender can come after you for the difference (see this link for more info on debt relief and next week's topic)!!!

While I certainly can’t walk in your shoes and tell you what you should do both legally and morally, I can give you the pros and cons so that you can make an “informed” decision. This post may be slanted towards the 'cons' of HARP 2.0, it goes without saying that it's much better to be informed vs mislead!  Better yet….speak to your CPA/Accountant/Attorney before making ANY decisions, so that you can truly decide…

HARP Schmarp….where’s The Beef, or is it a Real Deal?