Mel Watt, Federal Housing Finance Agency director, said he tells his mother when something sounds too good to be true, it’s probably a scam. But when it comes to his agency’s Home Affordable Refinance Program, it isn’t.
“It sounds like it would be a scam, but this time it’s not. There’s no downside to it,” he told an audience at a town hall-style meeting for community leaders and counseling agencies on Friday at Miami Dade College’s North Campus. “I love the HARP program because it rewards the people who I think are the most committed homeowners.”
HARP, created in 2009 by FHFA and the U.S. Department of Treasury, has helped 3.2 million homeowners nationwide whose mortgage exceeds the current value of their home and allows them to refinance at a lower interest rate. In South Florida, homeowners have saved an average of $217 a month with HARP.
The program only applies to loans owned by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, which are controlled by FHFA. There are some restrictions on participation, too.
Although the program has already helped millions nationwide, and about 63,000 from South Florida, the FHFA launched a national public awareness campaign this year to reach about 800,000 homeowners who may want to use the program before it expires Dec. 31, 2015.
“We’ve had problems getting people to take advantage of the program,” said Watt.
Florida is the state with the highest number of homeowners who are eligible for HARP but haven’t applied — 97, 318.
Watt and other housing experts, including representatives from the Department of Treasury, Fannie Mae and Freddie Mac, hosted the meeting to reach out to the 21,491 homeowners in the area who are eligible for the program.
“There are a lot of myths. Some people are told they don’t qualify,” said Robert Koller, director of credit risk management for Fannie Mae. “Borrowers don’t know who to turn to.”
To be eligible for this program, homeowners must be current on their mortgage payments, with no late payment exceeding 30 days in the last six months and no more than one late payment in the last year. Previously, the loan-to-value limits were capped at 125 percent but now there are no underwater limits. On the other end of the value spectrum, the current loan-to-value ratio must be greater than 80 percent.
Unlike HARP, other refinancing programs are capped at about 90 percent loan-to-value ratio, Koller said.
Additionally, the application process is streamlined and does not require as many documents for income verification, so applicants can finish the process within 30 days.
Bill Sevilla, director of homeownership preservation for the Neighborhood Housing Services of South Florida — a nonprofit that helps first-time homeowners or people facing foreclosure — said that HARP is a good program but not everyone is eligible.
“I’m one. I have a mortgage with Wells Fargo,” Sevilla said. “I’d have to just someday hope they’d come out with a program.”
Watt said the program can’t expand outside of Freddie Mac and Fannie Mae because the agency does not have control over other lenders.
“It wouldn’t be within my purview,” he said. “We don’t have that kind of relationship with the banks.”
Homeowners who aren’t eligible for HARP could be eligible for the Home Affordable Modification Program instead.
Enrique Soto of North Miami Beach was one of them. After a three-year process, he qualified for HAMP and had a $90,000 principal reduction on his mortgage.
“I had to go almost broke for the bank to understand that I could not pay what I was paying,” he said. “Now I even have some equity on it.”
Sevilla suggests that all homeowners should shop around even if they are HARP eligible. In some cases, what people would save in refinancing might not be worth it.
“If you don’t owe too much on your loan, then it might not be worth it because the closing costs might outweigh what people would save per month when they refinance their rate,” he said. “It’s not for everybody, but for those who see the numbers, it’s a salvation.”