According to an AP report “A resurgent housing market, rising home values and steady job gains are helping more U.S. homeowners stay on top of their mortgage payments.”
That same report stated that “The percentage of mortgage holders at least two months behind on their payments fell by 21 percent in the first three months of this year versus the same period in 2012”
It looks like homeowners are getting a little better at making their mortgage payments on time. It’s surprising as I contend the reality is that the economy is still at a snail’s pace, unemployment still historically low and U.S. job growth showing no sign of picking up back to pre-housing bust statistics.
It took around three years after the infamous housing market crash for the late-payment rate on mortgages to reach a peak of almost 7 percent in the fourth quarter of 2009. The rate has been steadily creeping down since.
One reason could be that many people have taken advantage of government programs to help homeowners that are underwater in their mortgages to find relief. I personally know of someone who refinanced under the H.A.R.P. (Home Affordable Refinance Program) program and were able to stay out of foreclosure and stay in their home.
What I like about the H.A.R.P. program is that it is for people who have been able to make their payment, although many struggling to do so, but were unable to refinance because the value of their home has declined and are underwater. H.A.R.P. was designed to help homeowners get a new, more affordable, more stable mortgage.
You might think that this would be a perfect program for those investors who were hedging the housing market by buying and flipping homes at the peak of the market and eventually left with investment property they could not sell and are now underwater. …What a great opportunity that would be for an investor, who rolled the dice and came up short, to be able to possibly hang on to their investment, take advantage of the program and ride out the housing decline.
But this program was designed for homeowners, living in their primary residence, who are about to lose their homes and be forced out on the streets! Right? Well, I’m happy to say the government remains predictable in what seems like a never ending stream of what I can only consider to be incompetence. With the H.A.R.P. program investors can refinance their investment properties at .5% above the best HARP rates regardless of credit, property type or equity! What?
When H.A.R.P. was first released in 2009, it had similar risk-based pricing that your everyday conventional loans had. A lot of homeowners were dejected to find out that even though they qualified for HARP the new higher credit requirements made these loans just too expensive. You would hear about a 4.5% 30 year mortgage but under H.A.R.P. were often offered 6% or higher interest rates.
“It was a gallant cause to make sure all homeowners who needed it could get a decent rate.”
The government then employed an adjustment cap to help homeowners who had these lower credit requirements. This adjustment cap was equal to about .5% to the homeowner’s interest rate. That means that if a 30 year fixed H.A.R.P. loan was at 4.5%, everybody who qualified for H.A.R.P. would only pay 5% (or less if they qualified). It was a gallant cause to make sure all homeowners who needed it could get a decent rate. But I don’t think they had the investor in mind when they conjured up this refinance stew.
Many people who are underwater bit off more than they could chew in purchasing a new home and with all of the strange mortgage products that were out there and the nearly nonexistent lending guidelines, got themselves into a property that was financially unsustainable.
Although I don’t agree with allowing investors to take advantage of this special program, I am glad it is in existence. It has helped countless HOME-owners save their house and make it possible, like in the case of the friend of mine, to keep their family together and take control of their finances.