December 14th, 2010

Are the wrong borrowers refinancing through HARP?



Underwater home Not surprisingly, one of our more-popular posts on this blog is a piece titled “HARP receives one year extension — what’s the point?” Despite originally being published on March 02, 2010, the post still receives comments — the latest coming at the end of last week.

One reader originally wrote to us back in November asking why their family qualified for a HARP refi. “We are not the people in the situation HARP was designed to address,” wrote our reader in November. But in this turbulent market, our reader said it best, “This is an offer we cannot refuse.”

Here was the first (11/09/10) comment we received from this reader (emphasis added):

Help me to understand why Chase, my existing mortgage lender, fed exed me an offer to refinance with a HARP 15 yr. fixed 4.125% loan with NO CLOSING COSTS. We are not the people in the situation HARP was designed to address. Our outstanding loan balance is less than 25% of the value of the home which has continued to slowly appreciate. We should have no problem refinancing and had lots of offers when we tested the waters a few months ago.

But this is an offer we cannot refuse — reducing our interest rate a full percentage point with absolutely no fees / even no application fees. It saddens me that Chase is turning their back on people in need and catering to families like us who are not suffering from this housing crisis.

Well, this has just happened and we have yet to close but anticipate no problems. Only possible glitch is a line of credit on our home we never used which got sold off to another bank and which we need to close. They refuse to accept an agreement to subordinate (the value of the home is at least double both together).

Still, I think it’s profoundly unfair of Chase to promote refinancing to the very people who least need HARP assistance when so many others are hurting.

Just days ago, we received an update from this very same reader — their refinance (through HARP) went through without incidence. According to one source our reader talked to, this type of HARP refi seems to be happening a lot these days:

Well, just to report that our refinance flew through successfully. The notary said she has been doing loads of these for Chase’s “good customers” in the past month. She says they want to tie these homeowners down before they decide to refinance with other lenders. Not the intention of HARP I suspect.

At this juncture, I’m not exactly sure why lenders are refinancing non-underwater borrowers through HARP. Looking over some of the documentation that was released when HARP was first announced, I don’t see a concrete financial advantage for lenders to refinance current, “above water” borrowers through HARP.

Does anyone out there have a similar story about their lender refinancing them through HARP, even though they don’t seem to fit the profile of a HARP borrower?

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5 Responses to “Are the wrong borrowers refinancing through HARP?”

  1. Tweets that mention Are the wrong borrowers refinancing through HARP? | HSH Financial News Blog -- Topsy.com Says: December 14th, 2010 at 7:05 pm

    [...] This post was mentioned on Twitter by Scotsman Guide, HSH Associates. HSH Associates said: Are the wrong borrowers refinancing through HARP?: Not surprisingly, one of our more-popular posts on this blog… http://bit.ly/dNTdus [...]

  2. monte Says: February 3rd, 2011 at 7:13 pm

    i am precisely the target borrower that HARP was intended for. i would urge anyone who does not NEEED the HARP refi to not partake of a GOV freebie just because you’re greedy. If it’s not intended for you, pass it on to the ones who need it and stop whining, gloating and being an inhuman unamerican. WOULD YOU SPEND FOOD STAMPS IF YOU FOUND THEM ON THE STREET? how about a bread line? do you line up or eat out?
    I AM VERY FORTUNATE TO GET THIS REFI. iv’e given to charities many many times. ive been fortunate, but now it’s my turn to need. you are as foolish as that fortunate girl named lohan who finds that it’s still not enough. m

  3. geneva Says: July 15th, 2011 at 4:40 pm

    HARP does supposedly have incentives for RESPONSIBLE homeowners such as my husband & I. We are trying to re-fi from a 30 yr to a 15 yr to pay off our home earlier and get a lower rate. When I got my 3 estimates from BOA with the HARP rate it still includes closing costs b/c it’s added in to your loan amount. Not sure where that’s helping us? The way I see it is WE as responsible homeowners are getting negatively affected due to the lenders who loaned $ to the irresponsible. Our home value has fallen drastically due to the housing crisis; BOA pulled our Line of Credit due to this over a year ago. I truly wish HARP did help people such as us: hard working, middle class people who live within their means but unfortunately you have to be irresponsible to get any assistance. Yes, many fell on true hard times but there is a large percentage of our population that think the American way is to spend what they don’t have b/c some safety net will always scoop them up. Fed up in FL!

  4. Chuck Says: January 18th, 2012 at 2:50 pm

    My guess is that the banks are refinancing borrowers who could get financing via other means to inflate the statistical numbers of mortgages they refinanced thru harp. Its a pure PR move on their (the mortgage companies) part because they can state “we refinanced xxxx families thru harp”, and its assumed the families they helped really needed it. Its a win win for the mortgage companies.

  5. Jennifer Says: February 26th, 2012 at 4:59 pm

    Not true at all. Every lender will have different guidelines and qualifications.
    If a borrower is NOT upside down, has not had any lates and is at 6.250 being offered 5.250 to save 200 a month why can they NOT TAKE THE BANK UP ON THIS OFFER? it’s a program that the government has allowed and lenders CHOOSE to participate in.
    The goal being Lowering interest rates, lower payment which in turn lowers risk for the lender and will help stimulate economy bc of the savings borrowers will see.
    One person choosing not to do HARP is not going to then allow another person to do it.
    Getting all of this stuff regulated and enacted is a process…..
    You have HARP for those upside down but on time and serviced by Fannie or Freddie.
    You have Modifications for those behind on payments
    And just a week ago the president proposed an additional refi program to help those not able to take advantage Of HARP bc their loans aren’t services by Fannie or Freddie.
    I’m not sure why everyone is getting panties in a bunch over it all.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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