Lowest mortgage rates in history fail to help housing market. 11 million houses are worth less than what is owed on them and 15 million are unemployed. HARP refinance program a failure.

USA Today on September 29, 2010 set forth the grim numbers in a report by Paul Wiseman and Stephanie Armour. "Anemic demand continues to hamper real (economic) growth, " says housing analyst Robert Andrews of IBISWorld. "The housing market needs to find its true bottom before things can finally turn around."

Home sales were thought likely to strengthen after a terrible summer. But the housing market was barely registering a pulse even after 30-year, fixed-rate mortgages hit a record low 4.32% earlier in September. This does not bode well for anyone who is hoping that their home equity appreciation may offer a financial rescue.

Nearly one in four homes with mortgages are underwater – more is owed on the houses than they’re worth reports Wiseman and Armour.

They report that the 2009 Obama HARP program (Home Affordable Refinance Program) has not been effective. Under HARP, homeowners can refinance even if their mortgages are 25% higher than the value of their houses. However, two requirements hold back the success of that program. First, their mortgages must be guaranteed by Fannie Mae or Freddie Mac, and the homeowners must be up to date on their monthly payments. Federal Housing Finance Agency director James Lockhart III predicted in 2009 that HARP could help up to 4 to 5 million homeowners lower their monthly house payemnts. The program has not been effective, as only 380,000 ho
homeowners had refinanced through HARP by the end of June 2010. Note: HARP is different from a loan modification under HAMP. The programs are different.

Wiseman and Armour report that Amhearst Securities analyzed several reasons for the failure of HARP, including (1) homeowners with negative equity are struggling to come up with the funds to pay the closing costs of the new mortgage (2) the mortgage industry laid off many people and cut positions and thus cannot cope with the small surge in HARP refinance requests and (3) mortgage servicing companies are reluctant to handle home loans originally underwrittenby lenders that are now out of business.

As reported in USA Today September 29, 2010. (USA Today publishes selected articles online so I apologize that it seems no link was available to the September 29, 2010 Wiseman/Armour article "Mortgage rates fail to motivate".

IDEAS FOR ACTION: Mortgage rates have already popped up since the 4.32% low earlier this month. DO refinance now and specifically insist on the HARP program, but avoid the temptation to pull home equity out to pay credit cards and other bills if you do have any home equity. If your home equity is less than $125,000 you may be able to refinance to a lower mortgage payment and soon thereafter reduce your credit card burden with a Chapter 13 0% interest repayment plan or a Chapter 7 wipe-out of credit card debt. Do not be afraid to ask relatives and friends to help you pay closing costs associated with an HARP refinance. As cynical as it may seem, consult with a bankruptcy attorney about surrendering your "underwater" home and then buying another one in a year or two that is "right priced" to the market so that you are not paying forever on negative equity.

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