While the housing market continues to recover, it has gone through a rather tumultuous period. Rising unemployment, the banking crisis and unfair lending practices lead to record numbers of foreclosures. Created in 2008, the Federal Housing Finance Agency (FHFA) regulates Fannie Mae, Freddie Mac, and the dozen Federal Home Loan Banks.
As Deputy Director of the agency, Sandra Thompsonâ€™s job is to help the FHFA insure liquidity and affordable housing activities, as well as help prevent foreclosures.
BLACK ENTERPRISE spoke with Thompson about her role and the housing market. Hereâ€™s what she had to say:
BlackEnterprise.com: Your agency works with the HARP. Can you explain what that is and the work you do with it?
Sandra Thompson: Home Affordable Refinance Programâ€”or HARPâ€”was created by the FHFA and the U.S. Department of the Treasury specifically to help homeowners who are current on their mortgage payments, but who are underwater on their mortgages. That is, they owe almost as much or more than the current value of their homes. Even if you got your mortgage loan at a bank, credit union or mortgage company, it may be owned by Fannie Mae or Freddie Mac. If so, it could qualify for HARP refinancing, and you could save thousands of dollars with a lower rate or other more favorable terms. No minimum credit score is required, and closing costs can be bundled into the new loan so you donâ€™t need much cash up front.
FHFA launched a national education campaign on HARP to reach those homeowners who may be eligible but have not yet taken advantage of the program.
To be eligible for a HARP refinance, homeowners must meet the following criteria:
â€˘ The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
â€˘ The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
â€˘ The current loan-to-value (LTV) ratio must be greater than 80%.
â€˘ The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.
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Has the HARP Program impacted many homeowners?
Thompson:Â All last year and perhaps the year before there was a lot of refinance activity, a lot of homeowners took advantage of the low interest rate environment. They were able to refinance in fact the HARP Program as of January 31st, we have about 3.1 million borrowers refinanced through the HARP program. I guess I really can’t emphasize enough how important it is to ensure that eligible borrowers and all institutions the large and small and urban and rural have fair and equitable access to mortgages.
The housing market overall has come back fairly significantly since the worst of times. Playing devil’s advocate a little bit. Does that then diminish the importance of HARP?
Thompson: I don’t think so. I think that there are a number of borrowers who are still eligible for the HARP Program. We’ve been looking at data trying to establish, one, what’s that number, and two, is there a reason that many of these borrowers have not taken advantage of the HARP Program. I can tell you that we talk to a number of focus groups. They say, one, they’re inundated with information from lenders, and the government. It’s just overwhelming, whether a phone call or else, the opportunities to refinance.
We also want to make sure that people know what HARP is. There’s the HAMP program which is a government modification program and then there’s the HARP Program which is the refinance program. There’s a lack of understanding about what the different programs are that are available. We have an outreach campaign that is targeted to the HARP eligible population.
What resources for current borrowers who want to refinance would you recommend?
Whatâ€™s the main challenge in getting people to participate in these programs?
Thompson:Â A number of people are still leery of coming forward if they are delinquent on their loans because itâ€™s a very personal situation. I think understanding whatâ€™s out there and what works for a borrower specific situation is really important. I think we need to figure out ways to have trusted sources Â communicate to borrowers what their options are. Because getting information from a trusted source is a lot different than getting a random solicitation. Weâ€™ve got to figure out creative ways to get the information where it needs to go so that more borrowers know what their options are and that they can avail themselves of these opportunities while we still are in a relatively low interest rate environment.