Marc Guzman's West County Blog

Ok maybe it’s not HARP 3.0 if HARP 2.0 hasn’t been released.  As a quick refresher, the Homeowner Assistance Refinance Program (HARP) was created to help underwater homeowners refinance their mortgages to current interest rates.  But HARP has fallen short of its original goal of helping millions of homeowners mainly due to its limitation of a maximum Loan-to-Value (LTV) ratio of 125%.  It is estimated that in the hardest hit markets, approximately 40-50% of homeowners are underwater by more than 25%.  Thus HARP 2.0 was created which would eliminate the 125% Loan-to-Value ratio among many other changes.  This would allow many homeowners to refinance to current interest rate levels allowing some to save as much as $300-$500 per month on their payment.

What’s the catch?

HARP 2.0 was to be released in December 2011 and be available to homeowners whose mortgage was owned by Freddie Mac or Fannie Mae.  The homeowner also has to be on time with their payments with no more than one late payment in the previous 12 months.  But the Federal Housing Finance Agency (FHFA), who is in charge of overseeing Fannie Mae and Freddie Mac, delayed HARP 2.0 until March 2012.  Their reasoning was due to trying to update the banks on the new procedures.

President Obama and the State of the Union

It appears that President Obama wanted to make this a part of his State of the Union address.  He did not go into too much detail over the new refinance program to take place in the coming months but he throw in an interesting twist.  The new HARP 2.0 would allow homeowners with mortgages NOT guaranteed by Fannie Mae or Freddie Mac to be refinanced.  Read that again… Now we know it wouldn’t go over well if taxpayers had to pay the bill to further refinance mortgages but Obama said the program would be funded by “a small fee on the largest financial institutions.”

I wonder if this “small fee” would come from the settlement between the Attorney Generals and the largest financial institutions?

*Picture by NYTimes.com

Ok we are now going into our 6^th year of this giant foreclosure mess.  By now everyone understands the process of a bank foreclosure.  Even if you are not actively seeking daily foreclosure news, you’ve heard your fair share in mainstream media.  So we all get what happens when you don’t make your mortgage payment, whether due to financial hardship or by personal choice.  So what happens when the Bank that holds your mortgage decides to walk away?

Yes I am asking this question because it is happening across our country.  It is not a common practice but in some communities where prices have been hit extremely hard, “bank-walkaways” happen.  Think about it… a homeowner decides it is not worth staying in a property and decides to walk away.  The bank holding the mortgage initiates the foreclosure process and in the process discovers that the costs to foreclose, rehab and sell the property exceed the property value.  The bank then decides to walk away since it would be less expensive; they would stop the foreclosure and release the mortgage lien off the property title.

Sounds good for the homeowner right?

Wrong.  The reason why the homeowner wouldn’t really benefit in this case is because most of the “bank-walkaways” are happening on already abandoned properties that cause neighborhood blight and are too costly to rehabilitate into livable condition. 

So who takes over the property?

Well the property just sits there vacant month-after-month, year-after-year until… guess who… the taxpayers come to the rescue.  It’s actually the City the property is located in but ultimately with taxpayer dollars is the property rehabilitated or demolished.  This is happening more and more across the country to the point that Congress is beginning to get involved.  Senator Sherrod Brown (D-Ohio) is actively engaging with the OCC – Office of the Comptroller of the Currency, the regulator of the financial institutions – encouraging them to require banks to foreclose on abandoned property and either rehabilitate the properties or demolish them.

So should banks be forced to foreclose on abandoned properties? 
Or should they be allowed to release mortgage debt when they choose to and walk away?