I have heard a lot about some federal government programs designed to help homeowners having trouble making their mortgage payments. How can I find out if I’m eligible?
The U.S. government’s two main programs aimed at helping financially troubled homeowners are the “Home Affordable Refinance Program” and the “Home Affordable Modification Program.” Most lenders refer to them as “HARP” and “HAMP.”
After a slow start last spring, both programs are starting to gain traction: Nearly 1 million owners are getting at least temporary relief under the plans, and officials in the Obama administration say the programs eventually could help as many as 9 million keep their homes and avoid foreclosure.
Qualifying for either program isn’t easy. I’m answering some of the most common questions that readers have been asking about this valuable but tough-to-get government-backed aid.
What is the difference between HARP and HAMP?
The Home Affordable Refinance Program is designed primarily for people whose monthly mortgage payments are up-to-date but who cannot refinance into a lower-rate loan, typically because their loan balance is higher than their property is worth. The Home Affordable Modification Program is aimed at owners who are current but are having trouble making their payments, as well as those already delinquent and facing foreclosure.
I’m still working, but I can’t find a lender that will refinance my loan because the value of my home is a lot lower than it was when I purchased it. Which program should I apply for?
Assuming that you’re up-to-date on your payments, you likely would want to apply for refinancing help under HARP. The catch is that your current loan must be owned by either Fannie Mae or Freddie Mac, the two quasi-government agencies that own about half of all U.S. mortgages. Call your lender’s loan-servicing department to determine whether Fannie or Freddie owns your loan.
There are other eligibility requirements. Key among them: The property must be your personal residence rather than an investment property, and your financial situation will have to indicate that you’ll be able to continue making prompt payments.
You cannot qualify for HARP if your first mortgage lien exceeds 25 percent of your home’s current value. For example, you’re eligible if your house is worth $200,000 and you owe $250,000 or less. But if you owe more than $250,000, you’ll have to look elsewhere.
We are behind on our mortgage payments. The bank has sent us a default notice. Can we get help under the other federal program?
Perhaps. The Home Affordable Modification Program, or HAMP, is geared toward owners who have already fallen behind on their payments or may do so soon. But in some cases, it also can be an alternative for borrowers who don’t meet HARP’s refinancing guidelines.
HAMP isn’t limited to those whose loans are owned by Fannie Mae or Freddie Mac, but it has some important eligibility requirements. For starters, the loan amount on your single-family house cannot exceed $729,750 (higher limits exist for owner-occupied homes of two, three or four units), and the first mortgage on the property must have been issued on or before Jan. 1, 2009.
In addition, you’ll have to provide documentation that shows that the payment on your first mortgage exceeds 31 percent of your gross, pre-tax monthly income.
If you meet these requirements, the company that services your current mortgage will likely provide you with a three-month “trial modification” plan that lowers your monthly payment as the lender gathers more financial information to qualify you — and will make the changes permanent if you meet the payments promptly during your trial period.
Do all lenders and loan-servicing companies have to participate in HAMP?
No, but most are. You can find a list of participating companies, plus details of both the HARP and HAMP programs, at the makinghomeaffordable.gov Web site. The site also provides tips for troubled owners who don’t qualify for either program, as well as contact information for agencies and certified counselors.
Another valuable source of information is the HOPE NOW Alliance (hopenow.com), a group of housing counselors and lending-industry participants that was created to help financially ailing owners keep their homes and avoid foreclosure. Its toll-free hot line is 888-995-4673, and its counseling services are free.