For underwater homeowners seeking opportunities to refinance, new options recently made available have led some to question the benefits that may be gained by these individuals as there are some who feel that homeowners may not see as much aid on a wide scale as they have in the past, which has led some to recall the potential benefits that were hoped to be made available through programs like the FHA short refinance plan. While the new Home Affordable Refinance Program is predicted to potentially offer more aid in areas that have been particularly troubled by devaluation, homeowners may not see a comprehensive solution to negative equity that, once again, has been proposed by past programs.
As an example, the new HARP qualifications could offer more homeowners the opportunity to refinance to a lower rate, but homeowners will have to take into account that certain personal financial factors may not lead them to a much lower rate, as HARP does not guarantee that the low interest rates that are being seen on home loans today will be necessarily offered for those who qualify for this plan. While certain changes were made to the program, like the elimination of fees and the removal of caps on the amount of negative equity a homeowner may have in place before they can qualify have opened the door for some, there are also positive reports that indicate states that have been particularly troubled by negative equity may see more help from this new plan.
Yet, many officials, with the President included in this number, have stated that this new refinancing opportunity will not necessarily solve all the problems that homeowners have, as we saw past failures in the area of the FHA short refinance program led some financial institutions to favor certain aspects of mortgage assistance help than others. As an example, the FHA short refinance plan, for homeowners who are unaware, potentially offered the opportunity for homeowners to get a rate reduction through refinancing and also principal forgiveness, but major mortgage servicers were hesitant to use this plan and, as a result, no benefits were seen.
While the HARP initiative changes may welcome more underwater homeowners into the fold, with some predictions coming in that a few million homeowners may benefit, the number who are suffering from negative equity but may want options like a principal reduction more than refinancing do still have issues when it comes to finding this option from certain servicers. Few major financial institutions have been willing to substantially forgive a large portion of homeowner mortgage principles, even when a great deal of devaluation has taken place, but there are some rumblings that a program to address principal forgiveness may be on the horizon due to the severity of negative equity that homeowners who may be current on their home loan, as well as those who may have a low rate, are still in a position where help could be beneficial.
Obviously, homeowners and officials alike hope that the new HARP program guidelines will be beneficial for homeowners when it comes to refinancing, getting an affordable rate, and potentially a more affordable payment on their mortgage, it’s hoped that this plan will have a substantially greater amount of success than past programs like the FHA short refinance program and that issues like principal reductions will be addressed for homeowners who are in a position where simple refinancing is not enough to help combat their negative equity problems.