Originally published Friday, December 2, 2011 at 10:01 PM

Latest attempt to help underwater homeowners launches

Homeowners who have missed mortgage payments in the past six months need not apply. This is one of the first refinance programs that doesn't require an appraisal to determine the value of the house.

The Orlando Sentinel

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ORLANDO, Fla. — Matt Hamilton has dutifully paid the loan on his Maitland, Fla., house and a nearby rental condo, but until now he could not refinance them to obtain more-affordable interest rates because the properties are financially underwater.

"It's been difficult because I'm so far in the hole that no one wants to refinance me," said Hamilton, a product developer for "But if you look at my payment history, I am a safe risk."

Starting this past Thursday, Hamilton and many other homeowners with "underwater" mortgages can apply for a new Fannie Mae and Freddie Mac refinance program geared for pretty much everyone who owes more on a home than it's worth — including landlords and second-home owners.

The federal government's previous foreclosure-prevention efforts, such as the Home Affordable Modification Program (HAMP), lowered the interest rates on mortgages of homeowners at risk of foreclosure because they had lost income.

But the new Home Affordable Refinance Program (HARP) is seen as a possible game-changer even for homeowners who are underwater, but who have stayed employed and continue making their payments.

Homeowners who have missed mortgage payments in the past six months need not apply. And not all the details — such as loan limits — have yet been disclosed. But this is one of the first refinance programs that doesn't require an appraisal to determine the value of the house.

"It's a reward for the responsible borrower who swallowed a bitter pill, but still kept moving," said Travis BeMent, mortgage-loan originator for Home Loans Today of Orlando, Fla. "There are a lot of people out there ready to pounce on this."

The program opens just as new reports show that more than half of the mortgaged homes in the Orlando area are saturated with more debt than they are worth. In all, 254,146 mortgaged homes in the four-county metro area are in that situation, according to a report released Tuesday by the mortgage-research company Corelogic.

Even though Orlando has a greater share of underwater homes than Florida overall or the nation as a whole, the percentage of "negative-equity" houses in the metro area actually decreased slightly during the third quarter: 51.6 percent of the mortgaged homes in Orange, Seminole, Osceola and Lake counties were worth less than their loans in the July-through-September period, down from 53.1 percent in the second quarter.

About 44 percent of the mortgaged houses in Florida, and 22 percent of those in the nation, were underwater in the third quarter, according to Tuesday's report.

The application process for the Home Affordable Refinance Program, or HARP, begins Thursday.

Many mortgages that are underwater today were given to homeowners at the peak of the market in 2006-07, when sales prices were higher than what they are today and when interest rates ranged from 5.7 percent to 6.5 percent. Today, interest rates on a 30-year mortgage are less than 4 percent.

One cautionary note about HARP: Interest rates could change by the time a qualified property owner's refinancing application is processed, BeMent said. Fannie and Freddie are not expected to have the ability to process the new loans until as late as next March.

But HARP, he noted, also offers a break to homeowners who want to refinance for 15 or 20 years instead of 30 years. To qualify, an owner must have a mortgage backed by Fannie Mae or Freddie Mac and will likely need a credit score of at least 620.

Orlando lawyer Jeremy Sloane hasn't missed any payments on a rental home he owns, but he still loses money on the property every month because the mortgage he took out in 2006 far exceeds the rent he collects, now that prices have collapsed. "At the end of the day, I don't think it's anyone's responsibility but myself to make the payments, but the frustrating part was that other people have been able to get out of their situation and not take a loss," he said. "This program will hopefully make it a lot more palatable renting out that house and not taking a loss."

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