HARP Refi Denial: Can I Switch Lenders
by Vanessa in Alexandria, IN, by Tina in Chandler, AZ, by Will in Philadelphia, PA
Ask Kate if the HARP refi program allows borrowers to switch lenders after a loan denial: Vanessa asks if she is restricted to using her current mortgage lender after they turned down her application for a HARP refinance.
Tina asks if she could lose her primary home or truck if she defaults on a HARP loan for her rental property. Will wants to know the number of times someone can refinance under the HARP program. See the comment section (below) for my answers to Tina and Will.
Ask Kate: Can I Switch Mortgage Lenders After HARP Refi and HAMP Modification Denial By Vanessa from Alexandria, IN
I have been declined for both programs, HARP refinance and HAMP loan modification. I'm being told I can only apply to my mortgage company. Why is that?
This is my main residence, my co-borrower past away, hence less income. I have owned it for 20 plus years. I have good credit and no other debt. Plus I'm self employed.
HARP was denied because I inherited a separate property. HAMP was denied because of low income. My mortgage company has included property taxes with the monthly payment which has made it double. And my interest rate is 9.25 percent!
Please help me understand why I can only apply to my mortgage company for these 2 programs. Plus what are my other options?
Thanks in advance, Vanessa
Kate's Answer: Can I Switch Mortgage Lenders After HARP Refi and HAMP Modification Denial
HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program) are two different animals. One program allows borrowers to choose from participating lenders. The other program restricts borrowers to their current loan servicers.
Who Uses the HARP Refinance Program
HARP is geared toward borrowers with negative equity (underwater) who cannot take advantage of traditional refinancing to lower their interest rate. Note that HARP is also available to homeowners with equity up to 20 percent.
Almost without exception, borrowers are not
boxed into using their current loan servicers for the HARP program. They are
free to shop among participating lenders to compare mortgage rates, closing costs, and loan terms.
But note that all mortgage lenders are not created equal. See Infuriating Lender Overlays vs HARP 2 Program Guidelines
for more details.
Who Uses the HAMP Loan Modification Program
HAMP is designed to meet the needs of homeowners who are struggling to make their house payments. Generally an economic or medical hardship has bruised the credit history, making refinancing unobtainable. So instead of a refi, the terms of the current mortgage are modified to create a lower payment.
Often a principal reduction or forbearance is included in the modified terms to reduce the monthly payment. See Mortgage News: Principal Reduction Program for Fannie Mae and Freddie Mac Loans
for the differences between the principal reductions and principal forbearances.
Unlike HARP, borrowers are restricted to using their current lenders to modify mortgage loans. See New HAMP Incentives Benefit Homeowners Big Time
for more details on incentives.
Additional Making Home Affordable Options
Making Home Affordable (MHA) was created to address the U.S. housing crisis. At least 13 options were created to bring hope to struggling homeowners unable to afford their mortgage payments and to homeowners with underwater mortgages. Go to Special Edition Making Home Affordable Options
for an overview of the options.
After perusing your options, call a free MHA counselor to ask them to look into the HAMP denial due to low income. I also suggest giving them the details on the inherited property in relation to the HARP denial. The contact information for the counselors is found at another Ask Kate question and answer... Free Making Home Affordable Housing Counselors
Property Taxes in Mortgage Payments
You mentioned that your mortgage company doubled your house payment by adding property taxes into the monthly sum. This is a loan requirement for HAMP and often HARP.
Keep in mind that the approximate amount you currently pay in county property taxes has been divided by 12 (months). Instead of you paying taxes directly to the county, 1/12th will now be added to each of your monthly mortgage payments. The lender will form an escrow account to hold your taxes until they are sent annually or semi-annually to the county.
So although your house payment has gone up, you will not be making a large tax payment directly to the county. In fact, the bottom line on your budget should remain about the same.
You are not the only one to ask this question. Read more about paying property taxes and homeowners insurance at Monthly Payments on Mortgage Out of Control
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