John C. Colwell has recently declared non-bankruptcy loan modifications a failure on this forum. Indeed, it is undeniable that federal programs such as The Home Affordable Modification Program (HAMP) have failed to relieve struggling homeowners of mortgage payments they simply cannot afford. The biggest company in the program, Bank of America, has completed modifications for fewer than 2 percent of the 200,000 borrowers it has enrolled. Foreclosures continue to plague an already battered national housing market. Furthermore, Congress has been as of yet unwilling to pass legislation that would allow bankruptcy judges to modify first mortgages on a borrower’s primary residence.

HAMP receives most of the mortgage modification attention because it is ostensibly focused on reducing principal payments for family’s trying to stay in their homes. However, another federal program aimed at helping stave off foreclosure by reducing interest rates has received less publicity but appears to be producing results that the anemic HAMP can only dream of. Enter HARP. The Home Affordable Refinance Program is designed to help people who can’t do a traditional refinance because their home has lost value. Borrowers must be current with monthly payments. According to a Charlotte Observer article, last month, the U.S. Treasury Department reported that HARP has enabled more than 4 million borrowers to refinance, with an estimated average savings of $150 per month. HARP can mean getting a lower interest rate, which lowers payments. The refinancing program also can get people out of interest-only loans, which typically call for increased future payments or a balloon.

In lieu of legislation that would allow bankruptcy judges to forcibly modify mortgages, perhaps a program like HARP that focuses on a more market friendly refinance is the best solution to the persistent housing crisis.

CAN’T REFINANCE?

If you can’t refinance because your home is worth less than you owe, the Home Affordable Refinance Program might help. Learn more and check your eligibility at www.makinghomeaffordable.gov.