Rebuilding American Homeownership RAH

by Nona in Eagle, Idaho and by Jen O. in Ashburn, VA

Rebuilding American Homeownership, also know as RAH or The 4% Mortgage, as designed by Oregon’s Senator Jeff Merkley, tackles the national problem of underwater mortgages. To rescue homeowners who owe more than their homes are worth, to the tune of $700 billion in negative equity, his plan, yet another version of HARP 3, proposes refinancing into low interest rates using both traditional and innovative mortgage programs.


On July 25, 2012, Merkley who also serves on the Senate Banking Committee, originated a bold and wide-based mortgage refinancing proposal, RAH, requiring no funding from American taxpayers. But how is RAH different than HARP 3, The Obama Refinance Plan, or even #MyRefi and who will pay for it?

The 4% Mortgage for Rebuilding American Homeownership

HARP 3 Refinance Proposal - Rebuilding American Homeownership
The plan is for the United States government to sell bonds to public investors, thereby raising the needed funds to support the homeowner program.

Claiming that RAH would turn a profit, Senator Merkley says it will also help to stabilize the housing market, increase job opportunity, and steer America into an economic recovery.

It's safe to assume when one out of every five homeowners is underwater, the risk of foreclosure among Americans will only further drag down our economy.

Yet if borrowers can dramatically lower their monthly house payments or reduce the time it takes to pay off a mortgage in spite of a lack of equity, money can flow more freely, boosting the economy.

3 Ways RAH Tackles Underwater Mortgages

  1. Homeowners could opt to shorten their term with a 15 year 4% mortgage,
  2. Lower their payment using a traditional 30 year fixed rate mortgage,
  3. Or choose a fancy-dancey flexible version combining 1st and 2nd mortgages for more immediate savings.
After choosing any lender to originate their mortgage, the homeowner's loan would be sold to a new government-sponsored Trust (or be guaranteed by the government similar to FHA loans). As the economy improves, the loans could be sold off to a secondary market but not before producing a modest profit.

Rumor has it, approval of Congress is not necessary to launch RAH. What THEN are we waiting for! And please forgive me for being cynical, I can't help wondering how many plans our politicians are going to propose! In the meanwhile, homeowners are struggling to hold onto their homes.

Take for example these two homeowners with specific questions about HARP 3, or should I say RAH...

Question 1: HARP 3.0 Refinance with a HELOC?

By Nona from Eagle, Idaho

Hi Kate, I enjoy your blog so much and have learned so much. I have a question for you. Our 1st mortgage is through a portfolio lender, AND we also have a home equity line of credit (HELOC) with another bank that is also a portfolio lender. Lucky us!

We, too, are underwater with our mortgage and have had so many doors close in our faces trying to find out if there is an option to help us save our home. To no avail, we are stuck.

Unfortunately, although we are current on both our 1st mortgage and the HELOC, and the interest rates are so low, we have been told that we cannot refinance due to having the HELOC. IF HARP 3.0 ever passes, do you know if it will help those with HELOCs as well? If not, I don't know where to turn and what we are going to do.

I'm afraid that having another door close will send us into bankruptcy. We have talked with both lenders, and they are not willing to do anything. Thank you so much.

***zz-portrait-left.shtml*** Ask Kate answers: HARP 3.0 Refinance with a HELOC

Hi Nona, It makes my heart sink to read your letter.

I understand some homeowners who still have equity are opposed to footing the bill for underwater neighbors. But any homeowner could unexpectedly discover they also have become stuck, even after years of timely mortgage payments.

After all, what control do borrowers have over the eventual owners of their 1st and 2nd mortgages?

Based on my research, I do not think HARP 3 will include 2nd mortgages. But that is by no way a final word because the HAMP program currently has a Second Lien Modification Program, the 2MP, which reduces both principal and monthly payments.

As I mentioned, several offshoots of HARP 3 to assist underwater homeowners are under scrutiny. None of us know the final details yet. In the meanwhile, I have two suggestions.
  • Ask the portfolio lenders if they participate in HAMP loan modifications by Making Home Affordable. Although mortgage parameters are not the same as the HARP 2.0 plan, HAMP is certainly a more palatable alternative to bankruptcy. If the loan servicer participates, an offer to modify the 2nd mortgage (2MP) would follow once the trial modification becomes permanent.

  • Albeit a long term solution, contact your local and state politicians as well as those who represent you in Washington DC, insisting on a useful plan to refinance underwater mortgages that will include those with a 2nd mortgage or HELOC. They must hear from their constituents to fully comprehend the price underwater homeowners are paying for the general downturn in the economy.
I wish you the best,

P.S. To read more about HAMP, go here: ***zzz-link-hamp.shtml***

Question 2: Would HARP 3 Even Be an Option?

By Jen O. from Ashburn, VA

Hi Kate, We have excellent credit, no credit card debt, and overpay our mortgage every month, and are not in danger of foreclosure. We purchased at the height of the boom, in 2007 (literally, just before it crashed), for $887,800 in Northern Virginia.

We have one loan with a balance of 700k (30 year fixed at 6.875%, interest-only payments for the first 15 years) and a HELOC with a balance of 87k at Prime minus .5%.

We're throwing more money into the 1st because it has a higher rate. Wells Fargo says our loan is owned by a Private Investor, and that they do not know which one.

We simply want a lower rate, and would even sign up to keep our payments the same (pay it off quicker) once lowered! Our current mortgage payments are just over $5200 a month but we are paying about $6000.

I have heard that HARP 3.0 will not be useful for those of us with jumbo loans. Wells says that they would be more than happy to refi us, if we bring $120k to the table... the amount we're underwater for in value. Is there a list of tentative (I know it's before Congress still) features of 3.0?

Any thoughts? Much appreciated!!!

***zz-portrait-left.shtml*** Ask Kate answers: Would HARP 3 Even Be an Option

Hi Jen,

Before I go any further, I have to ask how it is possible that an immense nationwide lender (any size lender for that matter) could NOT know which investor owns your mortgage. This is hogwash! I have printed countless servicing screenshots in the past and I guarantee you that specific investors are listed!

And one more rant... They'd be happy to refinance your mortgage if you fork over $120,000? Yes, I imagine that could make them quite happy! But for most homeowners, this is an unreasonable solution.

Moving on, program parameters vary somewhat between HARP 3.0 and RAH, to mention a couple of proposals floating about in WDC. You can see the highlights of the proposals thus far at: ***zzz-link-harp3.shtml*** Concerning jumbo loans, as proposed in the original Obama Refinance Plan, HARP 3 would mirror the county loan limits of FHA.

I believe you are in Loudoun County, right? So the current maximum FHA loan limits would be $729,750 for a single family residence if the Obama Refinance Plan, aka HARP 3, is passed by Congress.

Best wishes for an affordable mortgage plan,


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Senator Merkley's RAH Mortgage Program
by: Anthony from Lancaster, New York

Will Senator Merkley's RAH mortgage program be expanded to New York state?

Hi Anthony, Kate here...

Senator Merkley's Rebuilding American Homeownership Assistance Pilot Program (RAH (HARP 3 proposal) is still being tested in Oregon under the Oregon Homeownership Stabilization Initiative.

RAH is available statewide (as of August 12, 2013) in Oregon with the exception of Multnomah, Clackamas and Washington Counties. But by the end of the month, they are scheduled for access to RAH also.

I urge you to write your state officials and Washington DC politicians to request Senator Merkley's RAH (HARP 3 proposal) to extend to your state. Go here for your politicians' contact information:
How to Contact Washington DC and Your Local State Government

Best wishes, Kate

Harp 3 Refinancing Plan
by: Karen Skeens from Poinciana, Florida

When do you think the Harp 3 program will be out for a refinance? I don't qualify for any of the other refinancing plans.

Hi Karen, Kate here. As of September 4, 2012, there is no projected date for the release of HARP 3. Please take matters into your own hands and write your representatives in Congress. Ask why they aren't taking action.

In the meanwhile, look into the HAMP Tier 2 mortgage modification plan by Making Home Affordable to see if the program could help lower your monthly house payments.

Or if you have a home loan insured by the Federal Housing Administration (FHA)... FHA streamline refinancing is another option.

Best wishes in your pursuit of an affordable mortgage, Kate

HARP 3 Refinance Loan
by: IP from San Diego, CA

Has HARP 3 been passed yet?

Hi IP, Kate here. No as of today, August 17, 2012, HARP 3, also talked about as RAH - Rebuilding American Homeownership, #MyRefi, and the Obama Streamline Refinance Proposal, has not come to fruition.

So write your representatives in Congress! Make some noise and let your wishes be known!

Best wishes, Kate

Harp and Hamp did nothing for me
by: Andrew from Cook County-Illinois

Hello, I am sure I am not alone but Harp and Hamp did nothing for me. My rental property backed by Fannie Mae in Illinois-Cook County is valued at $90K and I owe $120k with 2nd mortgage $16k at 5.87%.

All I would like to do is take advantage of the low interest rate currently which is 4% for an "investment property". I am current on my mortgage and never late. Credit score is 700 and property is currently being rented to a tenant for 90% of mortgage.

Why was I denied a refinance due to high loan to value by Harp program. I tried refinancing thru my mortgage servicer and again denied. Basically seems as though people in my situation is stuck. "ALL I WANT TO DO IS LOWER THE INTEREST RATE"? Any help for me?

Hi Andrew, Kate here. Lenders are reluctant to refinance investment properties, even when there is equity. So I suggest writing to your Reps in Congress, telling them your story and asking for their attention to underwater mortgages.

Now is the time to contact them, while HARP 3 is still on the drawing table, to ask for rental properties to be included in the next version of the Making Home Affordable Refinance Program. You don't have much to lose except an hour of your time.

Then, if you haven't already, reapply for a HAMP Tier Two Loan Modification which as of June 2012 includes rental properties.

Best wishes, Kate

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