Alternatives to HARP 2 Refinance Roadblocks

by Rick, by Jan, by Lori, and by Renato

Ask Kate for alternatives to HARP 2 refinance roadblocks: Meet three homeowners who are having difficulties with HARP refinancing. For Rick, I have several suggestions regarding debt negotiators for modifying mortgages. For Jan, there's the MHA Unemployment Program (UP) and help getting past the maximum HARP 2 debt ratio. For Lori, HAMP may be her answer to an affordable payment for her underwater investment duplex.


In the comment section on this page, you will meet Renato who is financed with the FHA loan but is told by his lender that he needs a large sum of cash in order to refinance his mortgage.

I'm hoping this also helps your friends, relatives, and neighbors in their underwater mortgage struggles. Now for the four questions and answers...

Question 1: HARP 2 vs Negotiating Loan Modification Directly with Lender

By Rick

Hello Kate, it looks like I can't qualify for Harp 2 because my mortgage is not Fannie Mae or Freddie Mac. But I was told by a debt negotiator that because I have an interest-only mortgage of $650,000.00 at 7.12% with payment to be increased by 50% in 2017, they can negotiate with my current lender (Bank of America) to rearrange my mortgage to much better terms.

My house will probably appraise for the $650,000.00. Do I have a chance on any program? Thanks, Rick.

***zz-portrait-left.shtml*** Ask Kate answers: HARP 2 vs Negotiating Loan Modification Directly with Lender

Hi Rick,

I'd say you have a couple of choices.

One is to apply directly to Bank of America for a Making Home Affordable HAMP loan modification. Be sure to read about the benefits of HAMP here.

Secondly, you could look into going straight to B of A for their own modification alternative and eliminate the expense of the loan negotiator. However, I recommend reading the Ultimate Mortgage Loan Modification Guidebook beforehand. Go to Should I Do a Mortgage Loan Modification Myself where I review the financial e-book.

Thirdly, you could move forward with the debt negotiator but beware of cost. Find out upfront how much it is going to cost and what services they guarantee - IN WRITING! I would ask for references and check them out thoroughly before opening your wallet.

If you decide to proceed with hiring the debt negotiator, I'd first get the Ultimate Mortgage Loan Modification Guidebook and read it from cover to cover. No one is going to care more about your loan modification than you so equip yourself by understanding the process.

One more thought. Call an approved Making Home Affordable Counselor at 888-995-HOPE (4673) to discuss your options. You can also ask for help filling out the residential mortgage loan application and for actual assistance with your mortgage lender. I called them myself to check out the service and was very impressed.

Best wishes for your refinancing plans,


Question 2: Unemployment Becomes HARP Roadblock

By Jan

Kate, I have contacted countless lenders with no success. Forced into early retirement, I want to refinance to lower my payments. My credit score is over 800 and I have never missed a mortgage payment or paid late - on anything. I can show means to pay but will not likely be going back to work since no one seems to be hiring people my age.

I believe I meet all the HARP requirements but am told I cannot get a loan refi because I do not have a job. The unemployed are not supposed to be excluded from HARP but as you know, lenders pretty much still do as they please.

Do you know of any lenders who will approve a refinance for the unemployed? Many, many thanks for helping all of us. Jan

***zz-portrait-left.shtml*** Ask Kate answers: Unemployment Becomes HARP Roadblock

Hi Jan,

First of all, if you find that you cannot make your house payment due to unemployment, call your loan servicer about UP, Making Home Affordable's Unemployment Program.

Here is the initial eligibility criteria:
  • You are unemployed,

  • eligible for unemployment benefits,

  • live in your house and do not rent it out,

  • never had a Making Home Affordable HAMP modification,

  • got your mortgage before January 2, 2009, and

  • the current loan amount is less than $729,751.
In addition, Making Home Affordable says that UP can be used by loan servicers to lower payments permanently or suspend them up to 12 months.

Now back to HARP, I would suggest returning to your current lender. Ask specifically for your mortgage to be manually underwritten as opposed to running it through Fannie Mae HARP 2 underwriting software. (Only your current lender or loan servicer can manually underwrite your loan.)

This way, there is no maximum debt-to-income requirement as opposed to the 45% debt ratio limit that is programmed into the software.

I'd also carefully document your financial assets with official bank statements to show your net worth before applying for HARP. But in the end, we have to accept that lenders are squeamish about borrowers on unemployment. So if you have any other sources of income, document them thoroughly to give your loan the best chance at mortgage approval.

Best wishes for a lower house payment,


Question 3: Refinancing Upside Down Investment Property

By Lori in St. Paul, MN, Ramsey

My husband and I owe about $320,000 on a property that has dropped in value over last 9 years (down to about $270,00). It is a side-by-side duplex and the rents of $1250 on each side just cover the mortgage payments (2 separate loans). We have adjustable rate mortgages and just can't stand the uncertainty of not knowing if it is going to sock us with more payments by adjusting. It hasn't adjusted up though in past 18 months.

Are there any lenders out there who would touch this without having to make up the difference in loan-to-value? We have an excellent credit score. Thanks for you input!

***zz-portrait-left.shtml*** Ask Kate answers: Refinancing Upside Down Investment Property

Hi Lori,

Making Home Affordable's HAMP mortgage loan modification program now includes underwater investment properties. For a 2 unit rental, you can owe up to $934,200!

One guideline I greatly disagree with is the HAMP requirement for a mortgage payment on a rental to be delinquent. What an archaic and useless guideline for investment properties! So ask about this when you call your loan servicer. (Note that this guideline was eliminated a few years ago for owner-occupied homes.)

A hardship is required by HAMP to modify your mortgage payment and principal balance. Of course I do not know your current situation but I'd venture to say the uncertainty of adjustable rate mortgage terms could be a starting place.

For more details on HAMP for rental properties, go to HAMP Tier 2 Mortgage Modification News.

Best wishes for an affordable mortgage,


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Need to Refinance Underwater FHA Home Loan
by: Renato N. from Alexandria, VA

We owe $417,000 on a FHA loan and it was just appraised at $450,000. We originally bought the townhouse for $565,000 in 2005.

We currently pay $2980 a month including the FHA mortgage insurance. We just want to lower our monthly and avoid PMI if possible.

Please refer us to somebody who can help. We contacted our current lender, but we have to come with big cash at the closing. We don't have much liquid cash.

I hope to hear from you. Thanks. Renato N.

Hi Renato, Kate here. Because the current home loan is not backed by Fannie Mae or Freddie Mac, there is no option of refinancing your underwater mortgage using the HARP 2 program.

This is why all struggling homeowners should write their political representatives locally and in Washington DC to insist that they pass a version of the HARP 3 refinancing proposal.

See my last mortgage news write-up in the HARP 3 series at Rebuilding American Homeownership, the RAH Proposal.

In the meanwhile, a loan option available to you is the FHA HAMP version of Making Home Affordable's mortgage modification program. HAMP accommodates underwater mortgages and does not require cash from the homeowner. You can read more about the latest version of HAMP here.

You can also call FHA's National Servicing Center at 877-622-8525 for information.

Thank you for writing to Ask Kate. I wish you the best in finding an affordable monthly house payment.


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