Eligible For HARP or HAMP Requirements
HARP or HAMP? Are you eligible? What are the HAMP or HARP requirements? Millions of homeowners are struggling to survive financially after the 2008 depression. Their home value have declined deeply and many have lost their jobs, sending them a one way ticket to foreclosure. The Obama administration has issues some programs intended to help these homeowners, but far too many of them do not know whether they are eligible for the HARP or HAMP requirements.
HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program) are two programs made as part of the Homeowner Affordable and Stability Plan (HASP) their main porpoise is to help homeowners in poor financial situations a financial life-jacket. Both programs are aiming to help the people who have underwater refinancing needs. “Underwater” means that their current mortgage is much higher than the house value, this happened because after the subprime disaster of 2008/9 houses value plunged deeply.
For example a homeowner takes a mortgage at 2007 for a house value of $150,000, now the home market value is $100,000, and the mortgage is $120,000. The loan to value factor (LTV) is 120%. This is an unstable situation where the mortgage loan is much higher than the market value of the property, because it is risky for the homeowner and the lender too. These kind of mortgages with negative equity are held by millions of households, it is estimated that 25% of the mortgage market are underwater!
HARP Refinancing Program Requirements
The HARP was extended until June 30 2011. Basically many see this refinancing program as a failure, because it was used by a small percentage of the homeowners it was meant to help. As little as 709,900 refinances were done through this program, which is disappointing compared to the millions of borrowers it was intended to serve. The HARP assistance program is for people who are NOT in danger of foreclosure.
The eligibility to join HARP is to meet these requirements:
- 1 Year Homeowner Occupied – The homeowner must occupy the eligible property for at least 12 month before applying to the HARP assistance program.
- Must Be Individual/s – The HARP does not support cooperation, companies, partnerships or any other non individual legal identities. The homeowner qualifying must be a person.
- Must Be Current On Mortgage – Since the refinancing process means getting a new one in new terms, the lenders need to see you are a good customer, this means not being behind on any mortgage payment in the last year.
- 30 Days Deadline – You must not be late on any mortgage payment by over than 30 days.
- Loan To Value Ratio – To qualify for the HARP assistance plan your LTV must be below 125%. You may be underwater, but you should not be at the ‘bottom of the sea’ to be qualified.
- Freddie or Frannie – The mortgage you currently have needs to be backed by Frannie Mae or Freddie Mac to qualify. If you are unsure if whether your mortgage belongs to either of them check at the making home affordable (MHA).
HAMP Mortgage Modification Requirements
The HAMP modification program has a different set of requirements as this program is meant to help people who suffer a decline in income together with a upside down mortgage (underwater).
The HAMP modification program has three stages, the first stage is the qualification process, when the homeowner has to meet the minimum requirements as followed below, the second stage is a trial test, to to be current on the new mortgage for 90 days, only then the new mortgage terms become permanent.
For the first stage HUD has specific HAMP eligibility requirements:
- Front End Debt To Income Ration Of 31% – The ‘front end’ debt to income ratio is a measurement of how much of the gross income (before taxes) goes to returning the mortgage loan. People who have over 31% means they are financially sinking, and even if they are not yet delinquent on the mortgage they will soon be.
- Back End Debt To Income Ratio of 51% – The ‘back end’ debt to income ratio is the real factor for the family financial survival, as it takes into calculation all other debts too (credit cards, car loans, student loans and other obligations). Having more than 51% of the gross income owed as debts means a financial slippery slope or crash is predicted, these families with back-end debt to income of 51% or more will need to join debt counseling program.
- Owner Occupied Mortgages Only – The federal government want to help homeowners and not investors and home flippers. The borrower will need to prove they are living at the home they wish to include in the HAMP program, it can be 1-4 unit.
- Mortgages Before 2009 – Since this program is meant to help homeowners from the 2008/9 economic slowdown, only mortgages which were originated before 2009 are eligible to be qualified in HAMP.
- Unpaid Principal Criteria – The HAMP program wishes to help people who are going underwater, if not at the present than may be in the near future. Less than $729,500 unpaid principle for a single home unit. Less than $934,200 for 2 units; $1,129,250 for 3 units and $1,403,400 for 4 units.
- Second Lien – This is the most ‘tricky’ requirement, as it is beyond the homeowner reach and depends on the goodwill of the second mortgage lender. The HAMP requests the holder of the second lien (the other lender) to take a subordinate position with regards to the modified loan.
HAMP or HARP Success or Failure
Unfortunately too much hope was placed on these two programs to pull out the drowning homeowners from the underwater mortgage situations they have been at. Though a lot of federal funds have been invested on these two programs (and other) the figures are not optimistic. For the end of 2010 the foreclosure filings have increased dramatically! Bank repossessions continue to increase.
The main issues which make these programs unable to breakthrough are the reliability on the lenders to finance most of the modifications and fit the new mortgages into new terms and conditions, which in some cases means losing money. With too many people loosing their jobs and having low credit scores holds many of them from getting better rates.
For the HAMP program over 1.1 million homeowners are under a trial period, this means they are at the second stage, where they have qualified for these requirements and now they have new terms on their mortgage. If they manage to be current for 90 days these new terms and conditions will turn permanent.
So What Can You Do To Improve Your Situation?
If you will do nothing.. don’t expect anything to happen. The best advice is to bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.
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If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education.. Ignorance costs more.