HARP Refi, HAMP Loan Modification, Short Sale, Oh My!
by Victor in CA, by Ron in IL, and by Jean in NJ
Ask Kate for HARP refi, HAMP loan modification, and HAFA short sale help: Visitors to Ask Kate are the smartest! I so appreciate all of the questions. Here are 3 that I received this week regarding Making Home Affordable programs. Victor asks if the mortgage lender for his 2nd is obligated to refinance or modify the lien after a HARP refi.
Ron's loan servicer does not participate in the HAMP loan modification program. What are his options?
Jean writes back with another question about selling her underwater home to her daughter, this time via HAFA short sale.
Ask Kate: Modification of HELOC 2nd after HARP Refi By Victor in Pleasant Hill, CA
I was able to refinance my 1st mortgage under a HARP loan but was unable to consolidate the 2nd at the same time.
Is the 2nd mortgage lender required to offer a modification or a refinance if the 1st was funded under a HARP loan?
Kate's Answer: Modification of HELOC 2nd after HARP Refi
The underwater HARP loan program, designed for refinancing with less than 20 percent equity, does not pay off 2nd mortgages.
Even so, the borrower has a couple of options. The 2nd can be paid off with cash, which is not feasible for most homeowners. Or it can be subordinated to the new HARP loan, which is probably what occurred in your refinance.
So it is not a matter of the lender's refusal to modify or refinance your HELOC. Rather, HARP guidelines do not permit 2nd mortgage liens to be rolled into the refinance.
Tip: Borrowers in the HAMP loan process are eligible to apply for Making Home Affordable's 2nd lien modification program, 2MP.
Get more help at HARP Refi Program: Rates, Roofs, and 2nd Mortgages
Search my site by entering Ask Kate and a term into your browser's search box. So for the scoop on refinancing, search for Ask Kate Refinance. Try it!
Ask Kate: Loan Servicer Doesn't Honor HAMP By Ron B. in Pontiac, IL
I have qualified for Hamp II but my loan servicer who handles my loan for an investor doesn't honor the Hamp II.
Do I need to try and find a lender that does?
Kate's Answer: Loan Servicer Doesn't Honor HAMP
The very nature of a loan modification limits the process to the current lender or contracted loan servicer.
When a mortgage is modified, only the terms are re-written. The existing loan is not refinanced. So only the current lender would have the authority to alter previously agreed upon terms.
As unfair as it seems, participation in HAMP is voluntary among lenders. This becomes a major problem for struggling borrowers with lenders who do not choose to participate in the program.
Tip: Borrowers with Fannie Mae, Freddie Mac, FHA, VA, and USDA owned, backed, or guaranteed loans are eligible for modification solutions in similar programs.
I suggest you return to the loan servicer and attempt to negotiate an in-house loan modification. Many lenders offer them but you may need to ask repeatedly to get the ball rolling. See Who Can Modify My Mortgage - Loan Modification Help
which I wrote long before HAMP was in the picture.
Ask Kate: HAFA (Federal) Short Sale By Jean in NJ, Bergen County
Home in pre-foreclosure and realtor told me about the government HAFA program. This program sounds great.
But still want my daughter to purchase the home. But under the HAFA Short Sale program, I cannot sell it to her.
How can she buy it from the investor and without them asking for more than she has been pre-approved for?
Kate's Answer: HAFA (Federal) Short Sale
Yes, the program called Home Affordable Foreclosure Alternatives (HAFA) comes to the rescue of many homeowners who are not helped by HAMP hardship modification
or HARP underwater refinance
Resources under HAFA help struggling homeowners with Deed-in-Lieu of Foreclosure, Short Sale
, and as you may have discovered, a lump sum of $10,000 relocation funds.
Note: The amount for relocation funds has been increased from $3000 to $10,000 since answering many related questions.
HAFA Short Sale and Non-Arms Length Transactions
As I mentioned in your last answer, lenders are skittish when it comes to non-arm's length transactions, as in selling a home to family or interested 3rd party. Even more so when the homeowner is asking the lender to authorize a sale for less than the mortgage balance.
Important! I caution you not to try to skirt this issue as an omission of this nature could be construed as fraud. Even if you are feeling desperate, it's just not worth it.
HAFA Deed-in-Lieu of Foreclosure and Relocation Funds
Should a short sale become impossible to get approved, be sure to discuss a Deed-in-Lieu with relocation funds to avoid foreclosure
with your loan servicer.
You might also take comfort from reading Deb's saga at Short Sale vs Foreclosure - Agony of Homeownership I
and Reaffirm or Not to Reaffirm a Mortgage after Bankruptcy II
. (Don't miss her follow-up comments below my answers.)
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