The Chicago area still has more people with burdensome mortgages backed by Fannie Mae and Freddie Mac than any other metro area, and with a government-backed refinancing program ending in 10 months, another effort is being made to reach those homeowners.
The Federal Housing Finance Agency is beginning a 10-day social media campaign on Twitter, LinkedIn and YouTube to spread the word about its Home Affordable Refinance Program, or HARP, a refinancing program begun by the Obama administration. Nationally, the FHFA estimates that more than 367,600 borrowers are current on their mortgage payments but underwater on their Fannie and Freddie-backed loans, making the mortgages harder to refinance through traditional lending practices.
Some 27,639 Chicago-area homeowners are eligible for HARP. Illinois is second only to Florida in terms of HARP-eligible homeowners, with 32,169 borrowers, compared with 51,100 in Florida.
HARP was created in 2009 to relieve some of the pressures the housing crisis imposed on homeowners when home prices plunged. As home values sunk, millions of homes were no longer worth what people had paid, or the value assumed when they got their mortgages. The homeowners consequently could not refinance and get out from under high-interest mortgages even though interest rates dropped to historically low and affordable levels.
HARP makes it possible for people to refinance no matter how far the value of their homes has fallen, or how far the home’s value lags the amount still owed on the loan. Using a measure known as the “loan to value ratio,” homes can be refinanced under HARP as long as the loan on it is greater than 80 percent of the home’s value.
To check yours, use this calculator or divide the amount of your mortgage by the value of your home. Other information is available at www.harp.gov.
The FHFA estimates Illinois homeowners could save themselves an average of $2,207 a year through refinancing.
Still, Wanda Collins, manager of homeownership services for the Neighborhood Housing Services of Chicago, a government-approved housing counseling agency, said people need to evaluate the fees connected with refinancing, and the savings on the loan, before deciding if it makes sense. A person who is almost done paying off a mortgage or who is planning to move soon may not find refinancing worthwhile. Homeowners can check with a lender to see if they qualify.
To use HARP, people must have been making mortgage payments regularly on their homes for the last 12 months, although one late payment is permissible as long as it hasn’t been within the last six months.
Collins speculated that many don’t use HARP because they aren’t aware of it when still making payments regularly. Typically, people reach for help, she said, “when they are at the 11th hour and behind” on payments. At that point, they would not qualify for HARP relief.
Almost 3.4 million people have been able to ease their housing burdens by using HARP. The program was supposed to end at the end of 2015 but has been extended one year.
Last quarter about 5 percent of the nation’s refinancings were done through HARP. Last year, 24 percent of those using HARP loans had loan-to-value ratios greater than 105 percent, and 7 percent who refinanced through HARP had loan-to-value ratios greater than 125 percent.
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