HAMP vs. HARP: a tale of two government programs
The Home Affordable Refinance Program (HAMP) and the Home Affordable Refinance Program (HARP) are federal responses to the housing crash, with HARP set up to help underwater and nearly underwater homeowners refinance their mortgages, while HAMP was designed to aide homeowners in danger of foreclosing. Both programs are part of the Making Home Affordable Program which was created under the Financial Stability Act of 2009.
The two have performed dramatically differently, and for two primary reasons: original goals set, and the conditions under which each program is offered to homeowners. HARP is performing well because homeowners cannot be late on payments to qualify, therefore they are typically more credit worthy and/or stable, and the government originally said the program would help one million homeowners.
Contrast that with HAMP which is a last ditch effort for struggling homeowners on the verge of losing their homes – some due to issues like job loss or illness, others to banks that have unreasonably poor communication (misdirecting borrowers, losing documentation, and of course, pushing for a foreclosure without any humans reviewing accuracy of documents). The White House said this plan would help seven to eight million homeowners, so $75 billion was set aside to help reduce borrowers’ monthly payments to 31 percent of their current income.
Aside from the goals and structure of each program, the second version of HARP issues in 2012 allowed mortgage servicers to make big bucks on HARP, incentivizing one where no incentive directly exists for the other. Most coverage of these two programs continue to overlook the simple fact that you can usually follow the money to discover motives.
HARP “hits its stride”
E. Scott Reckard at the LA Times writes that HARP has hit its stride, as the program has helped nearly 1.1 million homeowners under the program last year alone, surpassing the original promise of one million for the duration. Additionally, the pace is accelerating as last year’s 1.1 million is more than the number of homeowners who received help under HARP in the previous three years combined.
“This is a program that has reached a lot of people — probably more underwater homeowners than anybody thought it would,” said Guy Cecala, publisher of Inside Mortgage Finance. “It is also one of the few programs that has rewarded people who have stayed current on their mortgages.”
The program has succeeded because it acted as a stopgap measure in a situation where homeowners that have paid on time couldn’t otherwise refinance.
HAMP remains an embarrassment
The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) watchdog group reported recently that HAMP participants are defaulting on their mortgages at an “alarming rate,” opining that the program has failed to ensure sustainability of the mortgage reductions given to participants.
SIGTARP notes that mortgages modified in the third quarter of 2009 are now defaulting at 46 percent, and as of the end of March 2013, over 312,000 program participants have defaulted.
“This is a significant problem,” Christy Romero, special inspector general for TARP told the Washington Post. “When homeowners fall out of these modifications, all of a sudden they’re facing huge mortgage payments. If they can’t afford it, they’re going to get foreclosed on.”
The Treasury does not require servicers to report why homeowners default, so they say they cannot offer specific reasons for the dramatic increase in default rates. The department claims the program has helped almost 6.5 million homeowners, but SIGTARP reports that fewer than one million people have received a permanent modification through HAMP.
The two numbers are quite different, because as we’ve long reported, the majority of applicants to HAMP rarely are offered permanent modifications, rather see only temporary modifications during the trial period of participation.
Politicians and economists don’t agree on the way forward – some say more government involvement must take place to help prop up the very slowly recovering, yet still injured sector, while others call for the programs to be abrogated permanently as they falsely prop up housing.
Housing is slowly seeing signs of improvement, so the pace of improvement will likely dictate whether the programs stay, go, or are altered, but during the current administration, it is highly unlikely that they will disappear, although some changes may be put into place so the history books don’t have to write off HAMP as a complete disaster as it is in its current form.
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
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