I always assumed the Obama administration housing platforms such as the Home Affordable Refinance Program (HARP) were intended for people who were having trouble staying in their homes due to sucker mortgages, home devaluations and/or loss of employment.
I also inferred from panicky news presentations that the incidents of foreclosures were so vast, numbering in the multimillions, that the banks were having trouble just getting to everyone who needed help.
As one e-zine article noted about HARP and loan modifications, "many homeowners have complained that this path of hope is virtually a dead end. Many people are not getting the help they were promised due to specific qualifying criteria and lengthy turnaround times for processing modifications. Unfortunately, the government can’t afford to bailout everyone."
So, I was very surprised when I picked up my telephone one day in early November and noted a voice-mail message from Wells Fargo Home Mortgage telling me that I qualified for a HARP loan and asking whether I wanted to see about refinancing.
Now I do have a Wells Fargo mortgage, but it’s not on my primary residence. I live in Arizona and own a condominium in Concord, N.H., which I rent to my sister. When she decided to move to New Hampshire from Florida because her two daughters lived in the state, it was easier for me to buy the condo than for her because she was retired and it would have taken a lot of her savings.
Wells Fargo Home Mortgage was a good company to work with and the process went smoothly. The condo wasn’t very expensive and, if I remember correctly, I put down almost 25 percent of the total purchase cost. That was about three years ago. Fortunately for me, the Concord condominium market wasn’t very intensive or overbuilt so the value of the condo unit has been maintained (no appreciation), but my investment wasn’t imploding either.
In short, the mortgage wasn’t in trouble and neither was I, the borrower. So, why was Wells Fargo Home Mortgage contacting me about a HARP loan? Actually, the bank was very aggressive about communicating with me because a few days after the call I received a letter from the bank as well.
The letter opened this way: "If you think you can’t refinance and you’re concerned about missing out on today’s historically low mortgage interest rates, now may be the time to act. The Home Affordable Refinance Program is helping more homeowners like you refinance, even if your loan balance exceeds the present value of you home — up to 105 percent."
I was curious why Wells Fargo was contacting me about all this, so I called the person who left me a voice mail. After exchanging pleasantries, I asked, "What makes me available for a HARP loan?"
The answer was very simple: My loan was backed by Freddie Mac. If a loan is a Fannie Mae or Freddie Mac vehicle, you are almost always eligible for HARP, said my telephone correspondent.
To show the Wells Fargo employee I knew something of what was going on in the world, I said something to the effect, "Obviously, with the government taking over Fannie and Freddie this type of mortgage seems pretty darn secure, which means most any bank would want to deal with it." …CONTINUED
Oh no, she added, "Just because a loan is Fannie Mae- or Freddie Mac-backed, it doesn’t make it automatic. To make it eligible for HARP there are some other criteria factored into it, such as what was the initial loan to value."
After the conversation I looked over the form letter from the bank. The current interest rate on my loan was 6.375 percent. If I got a new loan it would be 4.875 percent, with an annual percentage rate (APR) of 5.32 percent. According to this calculation, my monthly payment would drop from $623.87 to $516.53.
It was enticing yet not altogether accurate, because when I spoke to the Wells Fargo employee she asked if I wanted the numbers crunched. I said sure, and she was coming up with an interest rate of 5.5 percent. Once I threw closing costs and fees into the pricing, the difference between my old monthly payment and the new one would be less than $60. Not really worth it.
Nevertheless, something bugged me about the whole experience.
Through the first half of 2009, Wells Fargo refinanced approximately 750,000 customers’ mortgages using the HARP program. In July, Mike Heid, co-president of Wells Fargo Home Mortgage, issued this statement: "We continue to strongly support the Administration’s efforts, adding HAMP (Home Affordable Modification Plan) and HARP to the existing programs Wells Fargo already had in place.
"We are committed to continuing to work with the federal government, consumer counselors, nonprofit agencies and others to keep Americans in their homes, whenever possible."
And that included me?
The loan on the property the bank targeted not only wasn’t my primary residence but it wasn’t even close to failing.
When I spoke with the Wells Fargo person she said to me, "The original intent of HARP, when it was rolled out by the government, was to allow people to refinance where values dropped on their properties." I wasn’t even sure if that qualification applied to me.
As much as I liked working with Wells Fargo to get my loan, something about this whole business of using the HARP program to refinance "750,000" customers’ mortgages and working "to keep Americans in their homes" sounded wrong to me.
Based on my experience, perhaps Wells Fargo (and what about the other big banks?) may not have been targeting only the people in need.
The people who really need this program are probably still in need. Meanwhile, the safely middle-class may be getting opportunities to make their existence easier, financially. I just don’t think this was the reason HARP was created.
Steve Bergsman is a freelance writer in Arizona and author of several books, including "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade."
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