HARP Mortgage Saga, A Long Story

It has been over seven months since we pressed ahead with our mortgage refinance effort. This was the second bank with which we'd initiated the process, the first to try a HARP 2.0 loan. Seven whole months have gone by, during which nothing seemed to be happening. Finally, the problem was diagnosed. Fannie Mae, the 800-pound gorilla of mortgages, refused to cooperate. Why was Fannie Mae holding us up? Because it did not accept that our mailing address had been changed by the Post Office.

That simple little hitch, the result of the retirement of a country store owner who was also a sub-postmistress, caused a six-month delay in our refi loan approval. With 80 million customers, Fannie Mae has depths of personnel the ordinary person, or even the banking professional, finds hard to penetrate. Getting to speak to the right individual at Fannie Mae to untangle the address issue took hours and hours and phone call after phone call. And that was only after months of delays based on information sent to Fannie Mae by our current mortgage servicer. Fannie Mae has something called the SURF system, in which banks deposit information. Fannie Mae only picks up that information once a month, and the information also has to be in a form that Fannie Mae approves. So if the bank gets an i dotted wrong, it doesn't get a chance to correct itself until another month goes by. Calls to Fannie Mae get obtuse answers about why the information has not shown up on the SURF system. Pretty much a brick wall, in fact. 

None of this was directly in our control, and it took months to even learn what the holdup was. We did our part by obtaining official verification from our county of the address and presenting it to our bank. Then we had to ask the bank, the very bank that was about to lose our account if the refi goes through, to put the address change information into the SURF system. Our bank obviously had little incentive other than fairness to do so, but it did. Only, Fannie Mae kept saying it hadn't.

The HARP 2.0 loan we've been trying to obtain is what our lender characterizes as "vanilla." That is, it's really, really a safe bet for them. All our documents show that we are likely to pay our mortgage every month. Why is Fannie Mae being so obstructive? Because it's so large that by its very nature it has become a bureaucracy with arcane routines and systems. SURF is no California beach day.

Meanwhile, of course our loan documents all became outdated. The rules require that we update and resubmit them, and that includes providing new W-2s and new bank statements, plus signing and returning forty-one pages of disclosures. For the ordinary person who does not own a batch scanner or FAX, that's a nuisance. We also have to pay for yet another credit report, our third for this loan attempt, because they keep getting outdated, too. And all the dollar figures on the Good Faith Estimate change each time around. Drastically. Why would a credit report at the closing table now cost $75 when before it was priced at $50 yet the three reports I've paid for so far each run around $25? It's confusing, and this is just one line out of many that changed.  

I keep reading articles about how puzzling it is that more homeowners don't take advantage of the wonderful HARP 2.0 program. (Like this one from Fortune, "Why Some Americans are Turning Down Free Money") Could it be that the process simply is too onerous? I think that's a large part of it. Also, the mortgage interest rates offered to HARP loans are much higher than for conventional loans, so that's a deterrent, too. I've talked to others who got HARP loans, and the typical rate offered recently was 4.0%, a far cry from the 3.0% the media trumpets. Plus the closing costs are very, very high, not the mere nothing the Fortune article claims. Like nearly $5,000. Or, maybe not? I still can't make any sense out of the Good Faith Estimate we received. Huge dollar figures are batted about, both pluses and minuses, and I'm just confused.

Personal finance gurus tell us to shop around for loans, but the task is very time-consuming and getting past the doubletalk of loan originators isn't easy. Very few banks even offer HARP 2.0 loans, and many national banks may not do business in your home state. You can't just call up a bank and ask what interest rate they offer and what they charge in closing costs. They won't tell you. First you have to give them all your personal information, which they plug into a calculator, and then maybe they'll tell you. They speak in a language it is difficult for the lay person to understand. They also know that you're unlikely to sign up for a loan if they tell you up front that it will cost you $5,000 in fees, so they talk confusingly about credits and rebates and points. And most of us give up.

If we finally do get a refi, we'll end up paying more for our house over the life of the loan, because we're getting another 30-year-fixed instead of shortening the term to match our current loan. I know, I know. All the gurus tell us to get a shorter term. But finding a bank that offers a HARP 2.0 at all was hard enough. Finding one that offers a 20-year fixed would be looking for a needle in a haystack. So we're starting the clock all over again on our mortgage. This is not smart if we're going to stay in this house for the next thirty years. It is smart if we're going to sell this house in the next ten to twenty years. The immediate tax advantage is that new loan payments are more interest than principal and thus in theory, we can deduct the lion's share of our new payments. (While mortgage interest is still deductible; it's on the hit list of tax rules that may become extinct soon.) The other advantage, in fact the only real advantage of going to all the trouble and expense of getting a refi, is that it lowers our monthly mortgage payments. Why do this? So if we drastically lose income, we don't have to lose the house. That's the entire reason for going to all this effort.