HARP Mortgages to the Rescue by Jim Woodard on Creators.com

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HARP Mortgages to the Rescue

A relatively unknown type of loan — the HARP mortgage — has been structured to help homeowners who are having a problem making their payments. Some are at the brink of foreclosure and losing their home.

Home Affordable Refinance Program (HARP) loans are designed to help a specific type of homeowner — those who have diligently kept their mortgage payments current and up-to-date, but need a more affordable refinance loan. They have not been able to attain one because the value of their property has dropped, wiping out needed equity.

A HARP mortgage, available through June of next year, allows such a homeowner to refinance his or her current mortgage with a low-interest loan, even though the owner has minimal or no equity in the home. The program is intended to help families stay in their homes, supporting a continuing high proportion of Americans who own their homes.

In most cases, lenders require at least 20 percent equity in a property for a refinance mortgage. A HARP loan can be up to 125 percent of the home's current market value. And it can be processed quicker, smoother and more cost-effectively than other refinance loans for those who qualify.

One hitch is that the mortgage must be owned by Fannie Mae or Freddie Mac, the government-sponsored enterprises that own most home mortgages. Check with your lender to determine your mortgage's current owner.

Also, the owner's monthly payments must be current — no late payments of 30 days or more over the past 12 months. And the new mortgage loan must improve the borrower's financial situation.

A HARP loan can potentially help nearly 5 million homeowners transition from an unaffordable mortgage to an affordable one. But they need to know such a loan is available. Check with your lender for more details.

Q: Do most people still consider homeownership a good investment?

A: Despite mortgage payment problems experienced by many families, most consider their investment in a home to be very wise and prudent. In fact, 92 percent of homeowners responding to a recent survey said their home was a very good investment.

The survey, conducted by Princeton Survey Research Associates (commissioned by Bankrate), was primarily launched to determine the attitudes of Americans about finances and family life.

It showed that about nine in 10 respondents believe a home is a good investment for the future. But about 48 percent worry about losing their home or being unable to afford the home they live in.

It also showed that many people are split about whether stocks and mutual funds are good long-term investments. About four out of 10 Americans don't believe the stock market offers the best chance for long-term returns, while another 12 percent don't know how they feel about stocks.

In another study, it was shown that the average return on residential real estate over the past three decades was 5.92 percent.

Q: Are pending home sales rising?

A: Yes. In fact, they have been rising each month for the past seven months. These are sales that are under contract but not yet closed.

In August, pending sales increased by 6.4 percent over the previous month, according to a report from the National Association of Realtors. The pending sales volume was 12.4 percent above the same month last year.

"The rise in pending home sales shows that buyers are returning to the market and signing contracts," said Lawrence Yun, NAR's chief economist. "However, deals are not necessarily closing because of long delays related to short sales and issues regarding complex new appraisal rules. Many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, due to expire at the end of November."

Yun noted that there is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy.

"Despite the situation where pending figures and closed sale figures don't quite match up, they are a great forward-looking indicator of what the closed figures will be looking like. We expect to see a continuing rise in closed sales," Yun said.

These figures are particularly promising because they reflect a nationwide trend. Regionally, pending sales are rising most significantly in the Northeast, Midwest, South and West. The most dramatic increase in sales is in the Western regions, up over 20 percent from last year.

Q: When does Freddie Mac's HomeSteps offer expire?

A: The HomeSteps program — where Freddie Mac pays a portion of the buyer's closing costs and provides a warranty on the purchased property — expires on Oct. 30. It applies to homes owned by Freddie Mac. Purchase contracts must be submitted by the expiration date.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.