This week, the Obama administration announced that one of their stimulus packages meant to help struggling home owners would get a one year extension. The Home Affordable Refinance Program or HARP, a refinance program meant to help homeowners with underwater mortgages, will now run through June of 2011. Critics of the program are skeptical that the extension will make any difference, as so far the program has only managed to help around 200,000 mortgage holders. Originally, the Obama administration was hoping it would help up to five million.
The Obama administration is hoping that by extending the length of the program more homeowners can be helped. Michael J. Williams, president and chief executive officer of Fannie Mae said,
“Thousands of families have already received much needed relief … extending HARP for another year will enable us to help even more families.”
HARP is meant for homeowners who have not been able to refinance their loans into current low rates because their loan is underwater, meaning that their home is worth less than their mortgage. With the collapse of the housing market, millions of homeowners across the country are in the predicament of having an underwater mortgage. In some states, mainly those hit hardest by the housing market collapse, as many as 50 percent of homeowners are underwater. The program currently helps homeowners that are underwater by as much as 25 percent.
The program to date has had some snags. Many homeowners have been turned away because they were too far underwater to qualify for the program. Another downside is that the only loans that qualified for the program were those that were backed by Fannie Mae or Freddie Mac. At the beginning there were numerous delays and the process has been very slow for homeowners who have managed to qualify and take advantage of the program. Homeowners with second mortgages have also found it difficult to qualify.
Finally, with closing costs being high and the other expenses that go along with refinancing, many homeowners thought that the overall benefit was just not worth it. Only time will tell if the extension will indeed help more homeowners save their homes.