31 Dec
Posted in: My Ongoing Story, Process
By    Comments Off on 5 HARP Program Pitfalls

5 HARP Program Pitfalls

For the past 2 months, I’ve spent 1-2 full work days per week researching and applying for a program designed to help underwater homeowners like myself. I still would not call myself an expert, but I know a lot about the program, and understand a few of the ways in which this program is not doing it’s job. These are just a few that I’ve uncovered while devoting an unfathomable amount of time to understanding why the process is so difficult.

1. Overlays

Every lender has overlays, their own set of rules about the HARP program that are more restrictive than the official guidelines.

Case in Point: For 2-3 months, Bank of America had a freeze on approving homeowners with second mortgages for the HARP program. This rendered me ineligible, not by HARP standards, but by Bank of America standards.

2. Terms & Naming

There are a lot of programs, many with similar names, and each organization or lender has their own names, in some cases, making it even more confusing.

Case in Point: Bank of America told me that I did not qualify under the Making Home Affordable Program. That is the program that regulates HARP, HAMP and as many as 7 other programs. This was confusing, because I didn’t know if they were attempting to refinance me under HARP or HAMP (two very different programs). When I asked for clarification, and said I wanted to refinance under HARP, they said HARP was the same thing as the Making Home Affordable Program. I still don’t know if they had me in the right program.

3. Knowledge Barriers

Lender representatives and community organizations don’t always have all the facts, or don’t understand them, but will tell you that they do.

Case in Point: I spoke with 2 different people at the Community Neighborhood Housing Agency in St. Paul to get assistance in applying for the HARP program. The 2nd person was extremely helpful and understood the program very well. She said I should qualify. The first person I spoke with, at the same organization, said I did not qualify and was not underwater (which was extremely incorrect). When I asked her to add the numbers again, because I was sure I was underwater, she aggressively asserted that I was NOT underwater. This is an organization that helps homeowners understand programs like HARP every day of the week.

4. Confusing or Vague Guidelines

Many guidelines in the HARP program are vague, allowing for lenders to misinterpret or use vague areas to their advantage. In fact, the program itself, though “strongly encouraged” is optional to any and all lenders.

Case in Point:

  • Lenders who hold homeowners’ 2nd mortgages are encouraged, but not required to subordinate the loan. (If they don’t subordinate, HARP refinance is not possible for these homeowners.)
  •  The “No Appraisal” rule is not required, and leaves it up to the lender’s discretion as to whether it is needed.
  • In lieu of an appraisal, the way a home’s value is determined varies widely and can be pulled from a variety of sources (including zillow.com, estimated tax value and lender-generated data, leaving homeowners vulnerable to errors and inconsistencies.
  • The financial documentation checklist varies between lenders, organizations and official guidelines. Some of these are extremely time-consuming to produce (especially for self-employed people), and may or may not be required once the process starts.

5. Program Implementation Delays & Changes

Guidelines take too long to implement (4-5 months from release date), and historically, will change before the lenders finally implement the program. This lessens the amount of time that homeowners can take advantage of the program, and in some cases requires applicants to re-gather documentation.

Case in Point: When the program was officially released, I took several half days off to talk to gather federal tax returns, year-to-date monthly expenses (monthly profit and loss), homeowner’s insurance statement and other documentation. This was outlined in various places online, and I was told to gather this information from the Community Neighborhood Housing Agency.

Some items took hours to prepare, and I discovered later would not be needed (for example, year-to-date monthly expenses). Being freelance, I was able to juggle this, though it was not easy. Not everyone is in a position to keep taking off work to gather and regather documentation during work hours, only to discover later it wasn’t needed in the first place.

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