Get the Right Person
The first person I spoke with at Community NHS told me that I was not underwater and would not probably qualify for HARP. After researching this program for several weeks, almost every day since October 24, 2011, I was almost positive that she was wrong based on my current balance.
$148,000 | 1st Mortgage
$ 44,000 | 2nd Mortgage
$140,000 | Est. Tax Value
$125,000 | Zillow
Even if you remove the second mortgage, I still owe more on my primary loan than the value of the home is worth according to either of the sources that are officially used to determine your home’s worth (remember, you don’t need an appraisal anymore to apply for the HARP). Fortunately, this was not the person I met with when I came in for the meeting.
Rule #1. Listen to the experts, but don’t just take one opinion. Look it up in the official resource documents, do the research, and trust yourself.
Red Tape or Not, Some Employees Within These Organizations Want to Help
I want to mention that organizations like the one I visited help a lot of people out of difficult financial circumstances; they help people through financial hardships; and they foster programs that educate about finances and housing before buying a home.
But there is also red tape, and in my case, it simply came down to the title of the paperwork. I did not move forward with the HARP refinance through Community NHS because of the wording of their paperwork which read, “Community Neighborhood Housing Services Foreclosure Counseling Program. Intake Form.”
Without signing this paperwork, I was not able to officially benefit from their expertise. (Unofficially, I was lucky to have a quick chat about a few questions which I will outline in this post.)
The counselor I met with was incredibly knowledgable and helpful. She indicated that the paperwork should more accurately read NFMC Neighborhood Foreclosure Mitigation Counseling.
I was not comfortable signing documents that might reflect any misunderstandings about the status of payment on my house, or my intention which was to refinance via the HARP program, not to begin a foreclosure process.
The organization needs to connect helping you with an official program so that they can be credited for that. That is how they continue to receive funding. However, I think they need another name for the program, or a sub-program that is officially called HARP Refinance Counseling or Foreclosure Prevention.
Signing unclear documents is how I got into this situation in the first place, so I wasn’t about to go there again.
In our brief meeting, my unofficial counselor outlined an action plan that could be self-directed. Here are a few things I learned.
Other Refinance Options
• First and foremost, try to refi through your existing lender, if possible.
• Contact the City of St. Paul for another avenue to receive assistance in applying for the HARP program.
• Visit a different credit union or bank to refinance for the HARP program.
• Contact a credible mortgage broker based on referral.
Freddie vs. Fannie
Due to the complexity of the systems, lenders frequently either work with Fannie Mae or Freddie Mac, rarely both. Something to be aware of in the process. Credit Unions may more frequently assist with Freddie Mac.
Two mortgages should not be an issue for the HARP refinance. What lenders are looking at is that your monthly payment on your first mortgage, including principal and interest, prop taxes, and house insurance is MORE than 31% of your household’s gross monthly income. Lenders will look at debt to income ratios.
If your home insurance is in escrow, it’s less important to produce an insurance statement for the application process. Nonetheless, it’s not a bad idea to have your latest statement handy.
Final Check List for Documentation for the HARP Application
Documentation information varies dependent on different situations, ie: employed vs. self-employed; escrow vs. paying house insurance out of pocket, etc. (Not to mention misinformation.)
Here are is the final checklist for documentation needed to apply for the HARP for a self-employed individual with house insurance in escrow.
• 2 years of federal tax documents (signed and dated)
• year-to-date monthly P&L (monthly profit and loss from January, 2011 (or current year) to current month.)
LPMI (Lender-Paid Mortgage Insurance)
This is the one that stumped me earlier. I was not sure if LPMI was associated with my primary loan or now. If your initial loan has LPMI, you will not qualify for the HARP refinance program. My loan was an 80/20 piggy back mortgage and these did not require mortgage insurance. Therefore, my unofficial counselor indicated that I am very likely not to have LPMI. This was the last item on my checklist.
It’s looking like I will qualify for the HARP program, if I can verify that I do not have LPMI with my primary mortgage. I think the only verification item remaining is my debt to income ratio. Now let’s see if I can call a lender into action on this.
This San Francisco Chronicle article, “HARP 2 Refinanice Plan to Boost Borrowers, Banks,” talks about the case of the 2nd mortgage.
1. Your loan must have been backed by Fannie Mae or Freddie Mac prior to June 1, 2009.
2. You must have made mortgage payments on time. for the last 6 months, and at least 11 on time in the last year.
3. There is no loan-to-value restriction for fixed rate 30-year loans.
(HARP ARM loans are limited to 105% loan-to-value.)
4. The current loan-to-value (LTV) ratio MUST be greater than 80%.
5. No appraisal is required for the HARP.
6. Your HARP loan can include closing costs.
7. Your income will not be verified by the HARP refinance program unless your new principal + interest payment increases by more than 20 percent.
8. You do not have to refinance through your current lender to apply for HARP.
9. You cannot consolidate mortgages through HARP.
10. If your mortgage has LPMI (Lender-Paid Mortgage Insurance) you are HARP-ineligible.
*NOTE: This post will be updated over the next week as I learn more about the process.
When you receive a packet to fill in from your local Community Neighborhood Organization, don’t be alarmed if they send you a packet called Foreclosure Counseling Program. They send this because the information needs are similar, but do call your counselor and ask for the exact list of needs since you will get some clarification on what you need to bring in.
Here is the revised and better articulated checklist of what you need as a self-employed individual applying for HARP Phase II. Use other resources to check against this list, but this will get you started.
1. Call Your Primary Lender
In my case, I am to call Bank of America to see if they will help you with the refinance program. Let them know that you are working with a community neighborhood housing organization to apply for the HARP. The community housing orgs work in tandem with the government and are audited in order to assess the progress of the program, therefore they are good at making sure you have what you need. When lenders know this, it may help you.
2. Check the Estimated Tax & Property Value of Your Home
• check Zillow.com to see your home’s estimated value AND
• find out what your Estimated Tax Value is by going to the website of the county you reside
Here’s an example using my home at it’s current situation (Nov, 2011):
Original Home Value: $206,000 (April, 2005)
Est. Tax Value: $140,000 (see screen shot below)
3. Gather the Following (Self-Employed)
• 2 years of federal tax returns (profit and loss) with all schedules (1040 ez, etc…)
• year-to-date monthly expenses (monthly profit and loss)
• your latest utility bills (a spreadsheet may be ok if you have one utility bill for address verification)
• homeowner’s insurance statement
*Note: You may not need year-to-date monthly expenses. I was not asked to provide this when Bank of America was ready to refinance me (at a slightly lower rate with $3000 in closing costs — see this post). They indicated that I would only need a CPA to send verification for a few items.)
Read NPR’s follow-up story about HARP Phase II. What are the critics saying about this revised program?
The White House says it will help millions of people hold onto their homes through a government-backed modification program. But critics are skeptical the plan will be a success, in part because of the dependence on the good will of banks to voluntarily join up.
“The fallout from the recession has cut deeply into the housing security, employment and income of many Americans. But some parts of the country are clearly faring better than others. Here, three interactive maps show foreclosure and jobless rates as well as household income by county.”
Housing, mortgages, foreclosure and refinancing.
Las Vegas, NV
Monday, October 24, 2011
“President Obama joined homeowners in Nevada to push for changes to the Home Affordable Refinance Program, also known as “HARP.” The President is asking Freddie Mac and Fannie Mae to loosen HARP restrictions, making it easier for property owners to refinance their home loans”
“A year and a half ago, NPR News and This American Life teamed up to produce “The Giant Pool of Money,” a program that explored what was thought at the time to be the worst financial crisis the U.S. had experienced in decades. After that show aired, in May 2008, the crisis got much worse. How are the people profiled in last year’s program doing now?”
Obtain your home’s Taxable Market Value
For my county, they instruct me to go to:
Ramsey County Tax and Property Lookup at the Ramsey County website.
Type in your address
Look at it from 1st loan perspective.
Of course the website is not working, so they look it up for me.
Taxable Market Value: $140,000
They tell me this only applies to the first loan, so my house is not actually underwater. I need more information to understand, which I plan to gather at the meeting. Here’s what they tell me I need, as a self-employed individual applying for the HARP.
Items Needed for the Meeting at Community Neighborhood Housing Services (In Progress)
From my Bank
• 3 months of banks statements – business and personal
• Monthly mortgage statement (1st and 2nd loan)
From my Accountant
• 3 years of self-employed tax returns
• PNL (profit and loss statement) – January 1st, 2001 to end of October.
• Copies of all utility bills (on paper)
• Statement with my house insurance (in escrow)