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HARP refinancing: Freddie Mac erected barriers

According to new information recently disclosed by Freddie Mac officials, the mortgage company intentionally made it harder for Americans to refinance high interest mortgages because of its bottom line. In other words, they intentionally kept Americans locked in their high interest mortgages by creating barriers to HARP (Home Affordable Refinance Program) refinancing.

Had Freddie Mac and Fannie Mae agreed to a better refinance program, they could have helped nine million more homeowners save around $75 billion.

Instead, Freddie Mac was afraid that refinancing would lead to higher default rates (which has been proven wrong), and there is even evidence that the company created barriers because it viewed HARP as a stimulus program.

Some of the barriers erected after the bailout included:

  • Borrowers with a loan-to-value ratio of less than 80 were not eligible for HARP
  • Homeowners had to reappraise their homes before being considered for HARP
  • Borrowers had additional restrictions if they desired refinancing through a new bank

Now, Freddie Mac has a new CEO who has lifted some of the barriers and is allowing more HARP refinancing.

There are many editorials about whether HARP was successful, but the bottom line is that many homeowners have faced more debt than they would have had Freddie Mac provided more help through HARP.

Of course, refinancing is not an option for everyone. HARP benefits are only available for mortgage loans that involved either Fannie Mae or Freddie Mac. Furthermore, refinancing cannot provide full financial relief for families suffering from significant debt. An experienced bankruptcy lawyer can help you understand all of your options.


Source: ProPublica, "Freddie Mac made it harder for homeowners to refinance because it hurt their profits, might help Obama," Jessie Eisinger, Oct. 25, 2012

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