HARP 2 Refinance Plan 2nd Mortgage
by Amanda from Sacramento, CA
Ask Kate about risky HARP 2 refinance plan with 2nd mortgage default vs HAMP alternatives: Hi Kate - Is it possible to default on the 2nd mortgage and still keep our home? We heard that we could use the HARP program to refinance our 1st mortgage and then once that was put into place, default on the 2nd mortgage.
If we didn't default on the 2nd, the use of the HARP program would actually increase our payments by about $400 a month on a home that's already underwater.
Unfortunately, we bought our house for $440K on a 7 year ARM and it's now worth $230K.
Kate Answers: Risky HARP 2 Refinance Plan with 2nd Mortgage Default vs HAMP Alternatives
No matter how you slice it, that's risky advice from your friend.
Is it possible
to refinance with HARP, default on your 2nd mortgage afterward, and NOT end up in foreclosure?
I don't know. Are you willing to test out the theory on your home?
If the goal is to lower your 1st and 2nd mortgage rates and make the payments more affordable, let's take a look at this from a different angle.
Home Affordable Modification Program (HAMP)
Another program to consider is by Making Home Affordable, the Obama Administration, and Departments of the Treasury and Housing & Urban Development, HAMP.
Home Affordable Modification Program assists struggling homeowners by modifying their mortgage terms.
HAMP loan modifications achieve affordable mortgage payments by lowering interest rates, extending terms, and reducing loan balances. In addition and unlike a refinance, homeowners are not asked to pay mortgage closing costs.
Get an even better understanding of HAMP by going to these Ask Kate letters from homeowners with similar circumstances to yours:
Principal Reduction Alternative (PRA)
Along with help from the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF), HAMP offers principal reductions to homeowners.
In some instances, the principal is deferred. In other cases, a portion of the principal is actually forgiven.
Either way, monthly mortgage payments are not based on the reduced amount. So you can see how this would help homeowners get more affordable payments.
By the way, California is included in Hardest Hit Housing Markets. The complete list: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and Washington D.C.
Second Lien Modification Program (2MP)
This Making Home Affordable Program (2MP) is designed to work in conjunction with Home Affordable Modification Program to lower mortgage payments on the 2nd lien.
The servicer of the 2nd lien needs to participate in the 2MP program. After your modification closes, the servicer is required to offer a second lien modification. Existing information in the HAMP loan application will be used and no additional evaluation is necessary.
Credit Rating: HAMP vs Defaulting on 2nd Mortgage
It's possible that your credit scores may go down after receiving a mortgage loan modification but it's a given that defaulting on your 2nd mortgage will adversely affect your credit history.
Call your lender-loan servicer (you can't use another lender to modify your loan) or one of the HUD approved housing experts who offer free counseling at 888-995-HOPE (4673) to discuss your individual options and qualifications.
In the end, only you can decide how much risk you want to take with your
home and your
Good luck and best wishes for affordable mortgage payments,
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