HARP Versus HAMP: One Letter, World Of Difference


For many homeowners, making the monthly mortgage payment has become difficult, if not impossible. Predatory lenders lured some homeowners into zero down payment loans, option ARMs and other mortgages with unfavorable terms. Others have lost their jobs, or have homes that are underwater. Many could benefit from the opportunity to refinance or modify their current loans, in order to avoid foreclosure and keep their homes. Hence why the government created programs to help.

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Making Home Affordable (MHA)

The Obama Administration launched Making Home Affordable (MHA) to assist struggling homeowners through mortgage modifications and refinancing. A cornerstone of the program is the Homeowners HOPE Hotline (888-995-HOPE), staffed by HUD-approved housing counselors. These advisors are tasked with helping homeowners in three ways:
  • Answering questions about available options
  • Helping them prepare their applications for the MHA programs
  • Working with mortgage companies to facilitate a favorable resolution
Unfortunately, a recent article in the Chicago Tribune revealed that these counselors might be less knowledgeable than the MHA program asserts, and are turning away homeowners in need of refinance assistance. Help from others is good, but nothing is as important as helping oneself. Therefore, it’s important to understand the differences between the two available programs—HARP and HAMP—before dialing the hotline.

Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program (HARP) is for employed homeowners who are current on their payments, but unable to refinance into a lower rate traditional loan because they are underwater on their mortgage. While not in immediate danger of foreclosure, these homeowners may face a future risk due to unstable adjustable-rate mortgages and falling home values. In order for a homeowner to be eligible for the HARP program, Freddie Mac or Fannie Mae must own or guarantee the mortgage, and the current loan-to-value ratio must be greater than 80 percent. Calling the HOPE hotline should generate answers, but the MHA website suggests contacting a mortgage servicer first to determine if they participate in HARP.

SEE ALSO: How To Refinance An Inherited Property

Home Affordable Modification Program (HAMP)

The Home Affordable Modification Program (HAMP) is reserved for employed homeowners who are having difficulty making their mortgage payments, and are in immediate or imminent danger of foreclosure. The program will modify the terms of the mortgage to lower the monthly payment to 31 percent of the verified monthly pre-tax income; resulting in savings of hundreds of dollars each month, as well as stopping foreclosure proceedings. As with the HARP program, the MHA website advises homeowners to contact their mortgage servicer to find out if they participate in the HAMP program, prior to calling the HOPE hotline. Even if the servicer doesn’t participate, they may still offer other foreclosure prevention solutions. What’s the bottom line? HAMP and HARP were designed to help as many struggling homeowners as possible, however mortgage servicers and loan owners ultimately determine how helpful the program will be on a case-by-case basis.

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