The financial crisis pushed millions of Americans from their homes. And housing advocates complain that the government did more to prop up big banks on Wall Street than it did to help average people on Main Street.
But many of those people on Main Street could still qualify for a government program to help them save money by refinancing their mortgages.
At a recent town hall event at Ebenezer Baptist Church in Atlanta, former U.S. Rep. Mel Watt laid out the numbers: The Home Affordable Refinance Program, known as HARP, saves people who take advantage of it an average $200 a month. Several million Americans have refinanced their home loans this way. But the program could still reach a lot more people.
Watt recently became the director of the Federal Housing Finance Agency and oversees the HARP program. He says many Americans who hear about it think it sounds fishy.
He says if you're current on your mortgage and "somebody calls you on the phone and says, 'You are eligible to refinance your mortgage and save $2,400 a year,' what would you think?" With all the scams out there, Watt says, many people think "this cannot be true."
But Watt says it is true. And he's speaking to community leaders in cities around the country to encourage people to apply. So far he's gone to Chicago and Atlanta. He'll be heading in coming months to Miami and Detroit.
Watt says there are "800,000 more families nationwide that would benefit from the HARP program if they would just step forward."
Falling Interest Rates Make HARP A Better Deal
Bob Walters is the chief economist with Quicken Loans. His company was aggressive early on in trying to qualify homeowners for the program after it was launched five years ago.
He says interest rates have been falling again in the past few months, which means homeowners who qualify can save more money. He also says it's not just that homeowners think the program is too good to be true.
In many cases, he says, there's another reason many people aren't taking advantage of it. "You get denied maybe once or twice, and then all of a sudden you say, 'I can't qualify,' " Walters says.
Walters explains that in the first couple of years that HARP was in place, the rules about who could qualify excluded a lot of people.
500,000 Foreclosures That Didn't Need To Happen
Chris Mayer, a housing economist at Columbia University, was critical of HARP for this reason when it was launched. "You have to give it a C-minus in terms of what the government did in the early years of the program," he says.
Mayer explains that the idea behind HARP is pretty simple: The government guaranteed millions of home loans. It was on the hook if the loans went bad. And many of those homeowners were stuck unable to refinance into lower-interest mortgages. It didn't cost the government anything if it allowed those people to refinance at the current lower market rates. And that would prevent some foreclosures, which would save taxpayers' money.
But Mayer says that in its first couple of years, HARP could have reached a lot more people if it was better designed.
"There've been people who lost their homes to foreclosures that were otherwise preventable," he says. Mayer says he's done calculations based on data from a Freddie Mac study that suggest "500,000 people could have stayed in their homes."
With Current Rules, It's Easier To Qualify For HARP
Since HARP was launched in 2009, there have been several efforts to improve the program. And under the current rules, Mayer says he now gives HARP a B-plus or an A-minus.
Quicken's Bob Walters says "because the program has changed so much and gotten so much more flexible, the opportunity for people to get approved is much higher." But he says often "they don't know that."
Getting back to those scams Watt referred to, Walters says homeowners should know it doesn't cost anything to find out if they qualify for HARP. Any reputable lender can tell a homeowner that free of charge. To be eligible, borrowers need to have originated their loan on or before May 31, 2009.
STEVE INSKEEP, HOST:
The financial crisis caused millions of Americans to lose their homes. At the time there were complaints that the government was doing more to prop up big banks than to help average people. As we're about to hear there is a government program to help homeowners save money by refinancing their mortgages. It's still available. A million homeowners could still take advantage of it. Here's NPR's Chris Arnold.
CHRIS ARNOLD, BYLINE: At a recent event at a church in Atlanta, former Congressman Mel Watt laid out the numbers. The refinancing program saves people who take advantage of it an average of $200 a month. But the program could still reach a lot more people.
MEL WATT: Somebody going to give me $2,400 a year or more? And I'm going to turn it down?
ARNOLD: Watt recently became the head of the Federal Housing Finance Agency. And so, he oversees this so-called HARP refinancing program. But he says some Americans who hear about this think it sounds kind of fishy.
WATT: If you're paying your mortgage, you're current on your mortgage and somebody calls you on the phone and says you are eligible to refinance your mortgage and save $2,400 a year, what would you think? Oh, no. All these scams that we've heard about, this cannot be true.
ARNOLD: But Watt says it is true. In fact about 3 million Americans so far have already refinanced through HARP. And so Mel Watt is speaking to community leaders in cities around the country to encourage more people to apply.
WATT: There's 800,000 more families nationwide that would benefit from the HARP program, if they would just step forward.
BOB WALTERS: Especially since interest rates have dropped some over the last number of months, it's even become that much more advantageous.
ARNOLD: That Bob Walters, he's the chief economist with Quicken Loans. His company was aggressive early on trying to qualify homeowners for the HARP program back after it was launched 5 years ago. But he says there's another reason that many people aren't taking advantage of it.
WALTERS: You get denied maybe once or twice and then all of the sudden you say, I can't qualify.
ARNOLD: Walters says for a while the rules about who could qualify for the HARP refi program excluded a lot of people. Chris Mayer, a housing economist at Columbia University agrees. He says HARP in its first couple of years could've reached a lot more people if it was better designed.
CHRIS MAYER: There've been people who lost their homes to foreclosures that were otherwise preventable. I've done calculations that would suggest that as many as 500,000 people could've stayed in their homes.
ARNOLD: But that was then and now the roles are different and Bob Walters says that homeowners who want to save some money on their mortgage should give HARP a shot, even if they applied a couple years ago and couldn't qualify.
WALTERS: Because the program has changed so much and has gotten so much more flexible, the opportunity for people to get approved is much higher but they don't know that.
ARNOLD: Getting back to those scams that Mel Watt referred to, you should know that it doesn't cost anything to find out if you qualify for HARP. Any reputable lender can tell you that free of charge, you do need to have gotten your loan back before 2010. Meanwhile, Mel Watt is planning to visit Detroit and Miami in coming months to reach out to more homeowners. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.