Banks Block TARP Program for Homeowners

The HARP (Homeowner Affordable Refinance Program) would help stimulate the housing market and economy by allowing credit-worthy homeowners who are upside-down in their homes to refinance from the lower mortgage rates. Now here's a great program that wouldn't increase the deficit, pump billions into the economy and was designed to help 2 million homeowners. If expanded, it could help all 25 million homeowners who are upside-down in their mortgages. Why isn't it working? Because banks are just too risk averse, according to Bloomberg.The Obama Administration introduced HARP in April 2009, but only 810,00 homeowners have been helped. Of these, only 57,171 were more than 5% upside down. The rest had higher equity. Banks are cherry-picking applicants, and refusing to consider those that had worse equity. These are the same banks that would give loans to anyone just a few years ago.

There's really no risk to the banks, as all these loans are guaranteed by Fannie Mae or Freddie Mac. Banks don't want to be bothered with the paperwork involved with homeowners who have mortgage insurance. This, of course, applies to everyone with less than 20% equity.

By reducing costs for homeowners, the HARP program would help prevent potential foreclosures. Even credit-worthy homeowners can lose a job. Record-high foreclosure levels have created a backlog, known as the shadow inventory, that's hanging over the housing market, holding down prices and demand. Anything that reduces foreclosures would help get the economy moving again.

With all the billions in TARP funds used to bail out banks, it would be great to see more participation in this TARP program for homeowners. By the way, if any readers are bankers, I'd love to hear your comments below. Maybe there are legitimate reasons of which I'm unaware.

Meanwhile, If You're Facing Foreclosure

The Treasury Department has a program called MakingHomeAffordable that works with Fannie Mae and Freddie Mac to help you prevent foreclosures. I've heard many complaints about it from readers, but it's worth a try.

The Federal Reserve also has a consumer help web site. Here's where to go to report a bank that has been unfair or misleading, discriminated against you in lending, or violated a federal consumer protection law or regulation.

Related Articles

• There Are Two Homes in Foreclosure for Every One for Sale
• Don't Wind Down Fannie and Freddie
• Shadow Inventory Means Home Prices Are Staying Flat

(Credit: Justin Sullivan/Getty Images)

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