Compare HAMP Modification to HARP Refinance

by Walt C from South Florida

Ask Kate to compare HAMP modification to HARP refinance, nonprofit counseling to Making Home Affordable counseling, and taking action now vs later: Hi Kate, I've just started the process for HAMP or HARP (not sure which yet, we're underwater on a ARM) using a nonprofit credit company (NovaDebt) who I contacted through the MHA web page as an approved advisor.

Walt continues... I notice one of your answers mentions going through MHA vs. going directly to my lender (Green Tree). Which of these am I doing if I'm using Nova?

I am wondering with the election coming up if this is a bad time to apply.

Is anything likely to change for the better (to the homeowner's advantage, like principal reductions) after the election? I am concerned about becoming ineligible for something better if we have already refinanced or modified our loan under a MHA program.

Thanks for providing this web page. Very informative!

Kate Answers: HAMP Modification vs HARP Refinance Program

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Dear Walt,

Good questions!

Which is better, to refinance with the Making Home Affordable Refinance Program (HARP) or modify a mortgage using the Making Home Affordable Modification Program (HAMP)?

Pros and Cons of Refinancing with HARP vs Modifying with HAMP

As you may know, HARP 2.0 pays off the current financing of the homeowner. Because new money is being loaned, the transaction is categorized as a refinance.

Compare HAMP Modification to HARP Refinance Program
On the other hand, HAMP is merely a redo of existing terms, with no new money being loaned. Thus it's categorized as a modification.

Paying closing costs is a drawback of the HARP plan. But with HAMP modifications, homeowners do not pay closing costs.

However, when modifying a mortgage, most payments are rarely fixed for the duration of the term and may culminate in a balloon if the house is sold or refinanced in the future. Conversely, HARP offers fixed rates. But the monthly HARP payments may be higher than initial HAMP payments.

HAMP requires a significant hardship. HARP requires more stable credit history.

With HARP, homeowners are free to shop and compare participating lending institutions and refinance costs. But a HAMP modification can be originated only through the current loan servicer.

Regardless whether you end up refinancing or modifying your mortgage, you should analyze the cost, monthly payments, and loan terms. The lender decides if you qualify. But only you can determine if you can afford the payments. In other words, loan approval does not guarantee affordability.

MHA Counseling vs NovaDebt Counseling

I have recommended calling Making Home Affordable Housing Counselors because they should have an intimate understanding of the MHA options. Homeowners can depend on someone being available to talk with 365 days out of the year, around the clock.

Although I have never spoken with NovaDebt, I believe they are a non-profit entity providing in-depth credit, budget, and debt management counseling required for mortgage modifications.

But regardless of who counsels, advises, handles the forms, or acts as an appointed third party, homeowners receive mortgage modifications directly from their loan servicers. Period.

Refinancing and Modifying Before or After a Political Event?

Well, Walt this is easy to answer! I have no idea.

Compare HAMP Modification to HARP Refinance Program
The fact that President Obama released the proposed HARP 3 plan last spring yet Congress takes no meaningful action mystifies me. Other proposals, #MyRefi and Rebuilding American Ownership have also lapsed into silence.

Does this mean HARP 3 is getting closer? Does it mean other opportunities are on the horizon? Is it best to finance before or after the elections? I wish I knew.

But one thing you can depend on. I am watching and ready to break the news. So keep your eye on Kate's Best Mortgage Rate Blog to be the first to know about changes, updates, and news that affect homeowners.

Good luck and best wishes,

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HAMP vs Refinance
by: J Murphy

Hi Kate, quick question, we are currently in a home modification with Bank of America, (nightmare). Is there a way to get out of it and refinance with another lender? Thanks, Jim

Hi Jim, Kate here...

Unfortunately, modification of a mortgage can only be originated, processed, and closed with the current lender/loan servicer.

But fortunately, refinances can (generally speaking) be originated through any willing lender. Of course, approval is subject to their refinance guidelines which may not be as credit-friendly as loan modification underwriting.

If you decide to dump the modification, be certain to discuss cancellation with your lender. You don't want to trigger foreclosure proceedings if you are behind in your payments.

Best wishes, Kate

P.S. Only certain lenders participate in Making Home Affordable's HARP refinancing program. Ask upfront when shopping so you don't spin your wheels.

P.P.S. Try to get a lender referral to avoid another nightmare experience. I wrote Finding FHA Lenders With A Proven Track History but the tips overlap with all mortgage programs.

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