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Learning to Play the HARP

The Obama administration has a mortgage refinancing program that needs some tuning.
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It was a tense time during the Persian Gulf War. I was a "pool" reporter covering U.S. troops in northern Saudi Arabia. No one knew when the order to invade Iraq and Kuwait would come, but D-day was said to be "very soon." The unit I was attached to sat in what seemed a very exposed camp in the middle of desert nowhere, just a few miles from the Iraqi border. At sunset, tiny, reflective F-15s streaked overhead in formation; a while later, the low mountains at the horizon were outlined in flickering orange light for 10 minutes or so, as if fireworks were being set off behind them. Then the reflective F-15s flew back overhead, headed to base. I was glad to be on the side with the F-15s.

From this anxious atmosphere, a soldier in the unit I attended was sent on a critical mission. The unit had been drawn from the National Guard, and it rated just one Humvee, which the captain drove; the rest of us traveled in desert-camouflage SUVs outfitted with standard radial tires that the sharp rocks of the Saudi desert exploded with regularity. There would be no time to fix flats during the invasion; a blowout or two might mean being left behind in a desert littered with angry Iraqis.

So the unit's best scrounger was tasked with driving to the nearest city, where he would canvass car dealerships, buying as many double steel-belted radials as possible. A few nervous days passed, everyone wondering whether the scrounger would make it back in time. Late one afternoon, his truck finally rolled into camp; the members of the unit gathered around, laughing and joking, to help unload the haul. Cheers went up, and then more cheers. The scrounger had come back with six cases of Coca-Cola and — better yet — a full-size refrigerator to chill them in! He'd also managed to acquire several cartons of cigarettes. And one tire. It was not steel-belted, as I recall.


I present you this story from the government file cabinet labeled "Snafu 1991" because over the past six months, I've caught a glimpse of what appears to be a small piece of a "Snafu 2009" file. It involves a program meant, in part, to refinance mortgages for struggling American homeowners. Sent off across the financial desert to bring Main Street desperately needed help, the program, known as Making Home Affordable, has come back with too few tires. I'm not sure about the Cokes.

At the beginning of March, I began looking to refinance the mortgage on my home, a plain-vanilla, three-bedroom, ranch-style house that, because it's in Santa Barbara, Calif., cost a pile of money when I bought it last summer. But mine isn't the usual tale of wild Sunbelt speculation followed by plummeting real estate values brought on by The Great Recession. I got a decent deal on the house; it's now worth approximately what it was worth then.

But I closed my mortgage in a tight credit market and, therefore, at a comparatively high interest rate. This winter, I thought it would be a good idea to take advantage of lower interest rates by refinancing. And I thought the program that President Obama announced in February, now known as Making Home Affordable, would make refinancing a snap. The refinancing element of the program, known as the Home Affordable Refinance Program, aimed to help 4 to 5 million Americans with home mortgages owned or guaranteed by two "government-sponsored enterprises," Fannie Mae and Freddie Mac. HARP would help people refinance their mortgages and lower their monthly payments, even though the amount of equity in the homes wouldn't ordinarily allow refinancing.

My loan was owned by Fannie Mae. My family and I met the criteria set out on the Making Home Affordable Web site. I set off down to our friendly mortgage loan officer — and ran smack into unfriendly reality.

Well, actually, reality took a while to show up. I signed the stacks of disclosures and submitted the piles of personal financial information that are required of loan-seekers. And then I added the various other pieces of paper that the loan officer said the underwriters needed. Everything seemed to be progressing, until, weeks later, the lender that the loan officer had been working with turned down the refinance application because my mortgage included mortgage insurance.

Mortgage insurance compensates a lender if a borrower can't make his mortgage payments, and in an ensuing foreclosure sale, the lender can't recoup the balance owed on the mortgage loan. In my case, I had made a 15 percent down payment to buy my home. Generally, lenders prefer 20 percent, so my loan included mortgage insurance, a fairly standard arrangement before the collapse in housing prices. Since then, the underlying situation had not changed: My home appraised at the value I had paid for it, and my wife and I had good jobs and credit scores. I'd gotten an 85/15 mortgage; I just needed an 85/15 refinance.

In an ordinary financial situation, refinancing would've been relatively simple. But this was The Great Recession, in which banks are scared of even mouse-sized risks — and this is precisely the situation Making Home Affordable aims to counteract. But accessing the program was turning out to be anything but simple. According to Fannie Mae rules, because of the mortgage insurance, there was just one entity on the planet that could handle a Making Home Affordable refinance of my mortgage: The firm that was already servicing it.

I asked my friendly local loan officer, Elizabeth Winterhalter, also a vice president of the Bank of Santa Barbara, about the distinction between loans that don't have mortgage insurance and those that do, and why that would determine what lender could arrange Making Home Affordable refinancing. She said the distinction didn't make any sense to her. And after spending a couple of months trying to get me refinanced, she said she didn't understand the whole Home Affordable system, in which lenders seem quite content to make up their own restrictions on when they will and will not participate, and are quite willing to ignore Fannie Mae guidelines. She showed me correspondence from one major lender that simply declined to participate in Making Home Affordable refinancings if they involved mortgage insurance — even though Fannie Mae explicitly allowed such refinancing. If news reports are to be believed, other banks have declined to participate in the program altogether.

"I'm flabbergasted by the whole process of it," she said.

With Winterhalter sidelined, I contacted the entity that was servicing my loan, GMAC Mortgage, which, according to Fannie Mae, was explicitly authorized to get my mortgage-with-mortgage-insurance refinanced under Making Home Affordable. It would be an understatement to say that I've had a long, strange trip with GMAC. In the end, I've come to think the people I've worked with there are sincere and have really tried to help me. In the end, they may even get my mortgage refinanced.

But if they do, it won't be thanks to Making Home Affordable.

My first contact with GMAC was an unfruitful confirmation of Winterhalter's experience. In a series of phone calls and e-mail messages, I suggested that GMAC could refinance my mortgage — with the loan at 85 percent of the property's value — through Making Home Affordable. The GMAC representative I was directed to, Ed Tomko, insisted that GMAC could do no such thing. He said that GMAC's guidelines allowed it to loan only 80 percent of my home's value — meaning that I'd have to come up with some $60,000 in cash to refinance.

I had been around the refinancing block several times by now with Winterhalter, and I directed Tomko to pages from the Making Home Affordable Web site that directly contradicted him. In fact, at that time, HARP allowed lenders to refinance Fannie Mae and Freddie Mac loans that ran as high as 105 percent of a home's appraised value. That level has since been increased to 125 percent, meaning that a $125,000 mortgage could be refinanced, even if the home collateralizing it was worth just $100,000. Mine was at just 85 percent. And I pointed Tomko to Making Home Affordable Web pages that said GMAC absolutely could refinance mortgages with mortgage insurance. It was right there — black pixels on white Web page.

Tomko's response, which came about four months after President Obama announced the Making Home Affordable program, was direct: "I realize it states that, however ... we are not equipped to at this time because the program is so new and the details have not been worked out with the mortgage insurance providers. The only option I can offer is the [$60,000] one I e-mailed previously."

When I inquired further about GMAC's policies, Tomko made them even clearer by e-mailing me a copy of part of GMAC's guidelines for the Fannie Mae Making Home Affordable refinance program that said, "Transactions which require new or rollover mortgage insurance are not yet available for the subject refinance."

When it came to mortgage insurance, GMAC, it seemed, just didn't play the HARP.

The account I've just provided could suggest that Tomko is some sort of heartless corporate bureaucrat, when just the opposite is the case. After he showed me GMAC's policy on mortgage insurance, I asked him to direct me to a supervisor, which he politely did. I sent a note to that supervisor, Valerie Wines, pointing out with (I hope) suppressed anger that GMAC had received a $5 billion infusion of federal money under the Troubled Asset Relief Program — an infusion that was meant specifically to allow the bank to help break the credit crunch. It seemed odd to me that a TARP recipient would be telling its workers, in writing, not to follow the Obama administration's Making Home Affordable plan for helping hard-pressed homeowners to refinance. (Perhaps, on second thought, my anger was not so well suppressed.)

Wines may have responded positively to my note because I am the editor of a national magazine, but I like to think that she simply saw the unassailable logic of my thinking when she directed Tomko to embark on a pilot project: GMAC would attempt to play the Obama HARP and refinance my mortgage-with-mortgage-insurance. This was at the end of June.

A little more than two months later, after a couple of rounds of disclosure signings and document submittals, and a goodly number of e-mail messages back and forth, I spoke with Tomko, who seemed genuinely crestfallen to tell me the refinance was just not going to happen. During those two months, I am convinced, Tomko and another GMAC employee worked diligently to refinance my loan. In fact, Tomko told me that GMAC underwriters had approved my refinance application — but that he could find no mortgage insurer that would sign on. He said the insurers gave all sorts of reasons, several indicating that California — all of California — was a declining market in which they were not writing mortgage insurance.

I told Tomko that if someone with good credit scores, a significant income and a home that has largely held its value through the worst housing reversal of our lifetimes could not get refinancing under Making Home Affordable, then almost no one with a mortgage that includes mortgage insurance could. "I think you're probably right," he said.

When I asked to talk to a company executive, Jeannine Bruin in the GMAC Mortgage communications department responded this way: "While we certainly hope that you will portray favorably the efforts that Ms. Wines and her associates expended on your behalf, we are declining the request to be interviewed about the HARP program. Our only comment would be that we support the goals of both the Making Home Affordable modification and refinance programs to achieve more affordable mortgage payments, and we try very hard to help as many borrowers as possible under the programs' guidelines." I also asked to interview Treasury Department officials who could answer questions about HARP and e-mailed a list of questions; a Treasury spokeswoman did not respond to most of the questions or arrange an interview, though she did e-mail a short summary of HARP statistics to me.

I'm still not exactly sure what ended GMAC's HARP efforts on my behalf, and I don't have time to call every mortgage insurer in America to see if one will help me out. So I'll just state my conclusion this way: It's only my opinion, but I think Ed Tomko is a pretty smart guy who worked hard and, even though I qualified for the program, could not get my mortgage refinanced under HARP, no matter what he tried.

I have not chose to write my six-month mortgage refinancing saga because I have a problem I need solved. In fact, shortly after the attempt to refinance under Making Home Affordable collapsed, Tomko e-mailed, saying he thinks GMAC has found another way of refinancing my mortgage. I think it's going to work, and even if it doesn't, I'm going to be just fine.

But if Making Home Affordable continues as it's been going, I suspect a lot of other Americans won't.

In mid-September, Treasury Department spokesperson Meg Reilly said that more than 104,000 HARP refinances had been done. That may sound like a lot of refinancing, and Fannie Mae and Freddie Mac have been involved in some 2.9 million refinancings since March. Still, after half a year of operation, give or take, HARP has helped only a single-digit percentage of the millions of Americans it was targeted to. The other arm of the Making Home Affordable program, which aims to modify mortgages for those in imminent danger of foreclosure, has been similarly ineffective, but at least its failures have gotten some attention. HARP has gotten relatively little.

Holden Lewis is a reporter for, a leading publisher and aggregator of financial rate information; he writes about the mortgage industry and has called the HARP "confusing and confounding," particularly as regards people who want to refinance loans that have mortgage insurance. He says the government, banks and mortgage insurers were all extremely reticent about commenting on the record this summer. "I can't tell if the mortgage insurers are telling the truth when they say they're willing and able to do these [HARP] mortgage insurance loans or not," Lewis said. "At first I thought it was mortgage insurers balking. Now I think it's the banks. Why?

"I have absolutely no clue."

I am not a mortgage expert. I half expect that when this column is printed, I'll get a couple of dozen e-mails pointing out why I am an idiot who could've gotten my mortgage refinanced this, that and the other way. And those e-mails may be right, because home financing in this country is, I have learned, a constantly shifting undertaking, and so fantastically complex that even quality loan officers have a hard time keeping up.

And that goes directly to my point: Having spent significant amounts of my career investigating financial chicanery, I am used to complexity, and because of my position in journalism, I often receive special treatment even when I don't ask for it. The mortgage professionals working on my behalf appear to have gone above and beyond the call to access the Making Home Affordable refinance program for me — and still couldn't do it.

Making Home Affordable is a gallant attempt to help millions of ordinary people who were blindsided by a financial collapse not of their making. It is one of the few governmental responses to the financial panic of 2008-09 that clearly bails out regular folks, rather than banks, bankers and other stars in the financial firmament.

It is important that the program work, not for me, because (as I've heard a certain president say) this is not about me. It's about millions of ordinary folks who need to stay in their homes until housing prices rebound, and a housing market and national economy that shouldn't need to absorb a wave of avoidable residential foreclosures.

In economic terms, the program is important enough that the president should send both public and private signals that he's both unhappy and determined not to remain in a state of unhappiness for very long. And not to be cynical, but there's also an obvious political element to this situation: Underneath the current round of protests against an alleged "government takeover" of health care lies a belief — expressed rhetorically by Ronald Reagan and supported, in practice, by George W. Bush — that the government can't do anything right, that it's the problem, not the solution. The success of the Obama presidency rests on proving that belief wrong.

Making Home Affordable is relatively new and ambitious in scope; it's unsurprising that the program, born in crisis, hasn't worked precisely as intended. But the program really is a tangle of regulations that lenders and other necessary participants seem to ignore whenever they wish, and each time it doesn't work, one more citizen fears for his whole financial future, or gets angry, or maybe just shrugs, thinking, "It's the government; what did I expect?" The reverse is also true, however. Whenever the HARP plays, an American family sees that the government can work - and that family may just start to believe complicated plans to address health care, climate change and other major problems are more than snafu, masquerading as hope.

Miller-McCune welcomes letters to the editor, sent via e-mail to; via the comment sections of our Web site,; or by standard mail to The Editor, 804 Anacapa St., Santa Barbara, CA 93101.

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