HAMP vs HARP 3 with Bankruptcy

by Shelley from Springport, Michigan

Ask Kate about HAMP vs HARP 3 after having a bankruptcy: Hi Kate. Like many others I am underwater in my mortgage, but current on my mortgage and home equity loan. I am currently going through a divorce and owe $248k on my primary loan and $39k on the home equity 2nd mortgage. The judge has ordered my ex only needs to pay half of the home equity payment and did not make him liable for the rest.


Shelley continues... I work part-time and have 6 children (I adopted 4 of my children) and I do receive an adoption subsidy and about $800 per month in child support. I have a 6.125 interest rate on my primary loan, but cannot get it refinanced, as is backed by 5th3rd, although my credit score is 797.

My ex has threatened to file bankruptcy on the 20k on the Home Equity loan, even though he makes 60k per year and lives with his girlfriend for free.

I will not be able to find a place to rent in our rural area that is big enough for my family... I am struggling to hang on to my home, but can't work full-time due to some of my children having “special needs”. I believe I can make the payments on-time for the next year.

Question: When is Harp 3 expected to be voted on and if my ex files bankruptcy on the 20k, how will that effect my ability to refinance?

Kate Answers: HAMP vs HARP 3 with Bankruptcy

***zz-portrait-left.shtml*** Dear Shelley,

You have a lot on your plate. I'm relieved to hear you have the resources to make payments for close to another year.

Unfortunately, there is no projected date for the release of HARP 3 refinancing. Upon hearing Senator Merkley's RAH proposal - Rebuilding American Homeownership with The 4% Mortgage - I imagine political timing on both sides of the Congress-fence is responsible for the HARP 3 hold-up.

This is why I strongly encourage homeowners to write their representatives in Washington DC. Mortgage payments still come due once a month while our elected officials remain indecisive.

HARP 3 Refinancing and Credit Scores

Every version of HARP 3 has included some form of credit score minimum, although President Obama's proposal for HARP 3 set the bar at 580 which is pretty lenient. However if your ex-husband files for bankruptcy and includes accounts for which you are jointly responsible, you can assume getting mortgage approval for HARP 3 refinancing will be more difficult.

But here is something else to consider. If your ex-husband includes the mortgage, even a home equity loan, in a bankruptcy because he intends to quit making monthly payments, foreclosure becomes a risk for your home.

Consider bringing up this matter with your divorce attorney since the courts ordered your ex to make half the 2nd mortgage payment.

4 HAMP Options Through Making Home Affordable Program

In the meanwhile, please call a Making Home Affordable housing counselor to discuss options for your house at 888-995-HOPE (4673). There is no charge for the counseling.

Perhaps the recently retooled HAMP loan modification program, which lowers mortgage payments, would be a better option for you than waiting for HARP 3 refinancing. In addition to the basic HAMP plan, ask if you could benefit from any of these additional Making Home Affordable options...
  1. PRA: Besides lowering monthly house payments, HAMP loan modifications can reduce 1st mortgage balances through the Principal Reduction Alternative plan.

  2. UP: If you were to find yourself out of work, Home Affordable Unemployment Program reduces mortgage payments up to 31% of your income or could possibly suspend them for 12 months or longer.

  3. HHF: The Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets includes the state of Michigan. Homeowners in states hit hardest by the economic crisis are eligible to apply for
    • mortgage payment assistance if unemployed or underemployed,
    • mortgage balance reductions,
    • home equity elimination,
    • and help moving into more affordable living arrangements.

  4. 2MP: After homeowners complete the HAMP modification trial plan, lenders participating in the Second Lien Modification Program can reduce the balance and payment on your 2nd mortgage.
Shelley, good luck and best wishes,


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Not Freddy or Fannie and had chapter 7 bk 2 years ago
by: Matt from Orlando, FL, USA

Hello Kate, I want to turn my mortgage into a fixed rate, as it is presently in an adjustable. Harp is not available due to our loan is not Fannie or Freddie, and our lender will not refinance until 4 years after the discharge (we are at 2 years).

Our home is in an equity position, we make a decent income and have done everything right since filing. I am deathly afraid of the inevitable happening, interest rates rising in an acute manner, and we no longer being able to afford the payments.

We have a first at 256k and a second at about 45k. So we are around 300k and comparable properties in the area are 340k.

Its almost like we are in some vortex between not "bad" enough...and not "good" enough for help. Any ideas?

Hi Matt,

In lieu of waiting for HARP 3, I suggest looking into HAMP loan modifications. This plan from Making Home Affordable is originated through your loan servicer but you can call a Making Home Affordable counselor for personalized help.

You will find the details earlier on this page.

Best wishes, Kate

P.S. There are also HAMP modification programs for mortgages currently insured by the Federal Housing Administration (FHA) and guaranteed by the Veteran's Administration (VA) or United States Department of Agriculture (USDA).

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