HAMP Modification and HARP Refi After Alimony Ends

by KJR from Miami, Florida

Ask Kate about HAMP loan modification and HARP refinance after alimony ends: What happens to borrowers when their alimony runs out? Yep, their debt ratios go up. So a financial advisor in Florida asks how his divorced client who just lost $4500 a month in alimony can obtain mortgage approval.


Ask Kate: Qualifying for HAMP or HARP After Alimony Stops

By KJR from Miami, Florida
Ask Kate: Qualifying for HAMP or HARP After Alimony Stops

Hello Kate,

I am a financial advisor in Miami Florida and have a client who was married over twenty years and divorced many years ago.

Unfortunately before I met her, this person opted at the time of divorce to take a higher 10 year alimony and the house she was living in with a 600k mortgage.

She had foregone life time alimony and any investment/401k savings for this deal.

Now the alimony has stopped and the property needs to be refinanced in her name and because of other debt, credit issues, and obligations, it is becoming nearly impossible.

I am not a mortgage expert. But I did read into some of the options that the Hamp and Harp relief programs offer. I thought I read a provision that would help a person qualify for assistance who had a life changing event and large loss of income, in this case $4500-5000 a month, which made it difficult to maintain their homestead.

Please advise if this is an option. Thanks, KJR

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: Qualifying for HAMP or HARP After Alimony Stops

Hi KJR,

Both Making Home Affordable programs, HAMP modification and HARP refinance, make provisions for higher debt ratios.

Of course, higher is precisely the same measurement as a length of string, meaning how high is high! So your client's overall loan qualifications will need to be analyzed by a mortgage underwriter to see if she actually falls within lending guidelines.

Debt Ratios: Qualifying for the HAMP Loan Modification Program

The HAMP modification program for struggling borrowers is often a good fit for distressed homeowners. Debt ratio requirements are more forgiving. (There's that piece of string again.)

But the program can only be accessed through the current loan servicer which means the homeowner does not have the advantage of shopping for a compatible lender. But your client can and probably should familiarize herself with the lingo before making contact. Get a bird's eye view of the program at HAMP 2 Mortgage Modification Overview.
Lenders make mistakes and no one understands your income better than you. Learn about Calculating Debt to Income Ratios so you can spot potential errors during the approval process.

Debt Ratios: Qualifying for HARP Refinance Program

HARP was originally described by the White House as a program for responsible homeowners. Of course, this was offensive to many borrowers who fell outside the initially stringent guidelines.

(HARP has since been referred to as the program for borrowers who are current on their mortgage but lacking sufficient equity for a traditional refinance. Nah, that isn't wordy.)

Well, because early guidelines were rigid, sweeping changes eventually transformed the original HARP into the new and improved, more borrower-friendly HARP 2.0. One improved guideline that will be of interest to you pertains to debt ratios, specifically, more borrowers with higher debt ratios will get approved.
Read more at New HARP 2 Loan Announcement which outlines guidelines, eligibility, and benefits.

No-Income Verification HARP Feature

Then in 2012, Fannie Mae and Freddie Mac added a no-income verification feature to the HARP program. Instead of focusing on debt-to-income ratios, participating HARP lenders were allowed to issue an approval without verifying income if the homeowner had saved the equivalent of 12 house payments.

Yet today, lenders still aren't falling over themselves to grant no-income verification approvals. So don't be surprised if your client is not met with open arms when asking about the feature. Even so, she should know what is available because understanding how to ask about mortgage programs is an important step to loan approval.
Here are two of my articles that will familiarize borrowers with the program: Harp 2 No-Income Verifier Refinance Opens Doors and HARP 2 Refinance Embraces No-Income Verification Guidelines.
Best wishes,

Ask Kate

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Hardship Mortgage Information
by: Kate

Hi KJR,

I forgot to include this letter from Sharon who doesn't want to depend on lending institutions to decide between modifying and refinancing her mortgage.

Go to Hardship Loan Modification or HARP Refinance Plan for hardship options.

Best wishes,

Kate

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