News Column

Underwater Mortgages May Qualify for Re-Fi Loans Under HARP

Dec. 25, 2012

Bruce Krasnow

Scott Robinson of Gateway Mortgage on Cordova Road has a message for all those homeowners who have not refinanced their mortgage in the past two years: Back up the train -- this may be your last chance.

Robinson and other mortgage experts in town say a new government program allows refinances even for properties with negative equity. That means that if you owe $200,000 on a home that would sell for $180,000, there is a chance you can still refinance into a new loan with a lower monthly payment.

The program is called HARP -- the Home Affordable Refinance Program. It means that the companies that guarantee government home loans now accept so-called "underwater" refinances as long as the owner has a good credit history, has not missed a payment and can show they have steady income. The mortgage must also be owned by Fannie Mae or Freddie Mac, the two companies that dominate the secondary mortgage market and buy most of the home loans from private lenders.

Additionally, the negative equity cannot exceed 125 percent, which means a home with a $125,000 mortgage must appraise at or higher than $100,000.

The philosophy behind the program is that a homeowner is much more likely to walk away from a property when they have nothing to lose. And so "why not give you a chance to lower your payments and continue to pay your loan," says Robinson, who has had dozens of inquiries about the program.

The new lender will not write down the loan amount, but with mortgage rates much lower than even two years ago, it is still likely monthly payments can be reduced even on the full amount owed. For example, the payment on a $125,000 mortgage at 6 percent would drop to $600 a month from $750 if refinanced today's 4 percent rate on a 30-year fixed mortgage.

Robinson says those with questions can call him at Gateway Mortgage, 428-0331, or consult with any other mortgage provider in Santa Fe. Many will provide a free consultation to homeowners thinking about a refinance.

The website bankrate.com has the best summary of these refinance programs. Go to bankrate.com and use the search words "underwater refinance options" or click here from our website -- www.bankrate.com/finance/refinance/refinance-options-when-you-re-underwater-1.aspx

Another thoughtful comment was sent to me on last week's column about fast-food possibilities in Santa Fe. After the rave reviews about Panera Bread, David Gamble went to the company website and shares the following:

"Their website says: Panera Bread does not sell single-unit franchises, so it is not possible to open just one bakery-cafe. Rather, we have chosen to develop by selling market areas which require the franchise developer to open a number of units, typically 15 bakery-cafes in a period of 6 years."

Gamble adds, "It seems difficult to believe that anyone could be well-capitalized enough and be able to find enough locations even if the market area included the whole state."

He also has an interesting insight about the popular In-N-Out Burger, "The real question is why In-N-Out Burger jumped over us and went from Arizona to Texas!"

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Source: (c) 2012 The Santa Fe New Mexican (Santa Fe, N.M.)