On Monday, October 24, 2011, the Federal Housing Finance Agency announced major changes to the Homeowners Affordable Refinance Program (HARP).

The old version of HARP, which had been in place for about two years, assisted 900,000 homeowners in their efforts to refinance their mortgages. However a report from PR Newswire highlights two major problems with 1.0 that have failed to be addressed in the revamp:

  1. Subordinate loans – debt which ranks after other debts should an individual fall into bankruptcy.
  2. Homeowners that no longer qualify for a loan due to changes in credit score, employment status or some other key factor.

Labeling the latest program changes “another government boondoggle destined for failure,” the PR Newswire Report does not mince words. Further stating that “for homeowners who are current in their mortgage obligations, their existing loans should be modified without regard to their current credit, income or employment status,” the piece claims that a failure to address this inconsistency does not bode well for success.

CoreLogic, a leading provider of housing market analytics, released a report this week entitled CoreLogic Identifies HARP 2.0’s “Winners and Losers.” The media advisory is decidedly unclear about the short or long-term prospects of the new program and its ability to revive the flailing housing market. Concluding that “the local housing markets themselves will have no immediate benefit but may over time due to the economic stimulus of the tax benefit and reduced delinquency risk in the future,” that is hardly a ringing endorsement for the changes.

One thing is certainly clear. As the housing market, and homeowners, continue to struggle, something must be done. Foreclosures are up, prices are down and the job market shows no real signs of improvement. New, forward-thinking programs are welcome, but if they contain the same problems as old ones, I am not sure of the point.

Home Affordable Refinance 2.0 Program link.