YOKOSUKA NAVAL BASE, Japan — Historically low interest rates and new government programs have swelled the number of servicemembers interested in refinancing their mortgages, military lenders and legal service officers throughout the Pacific said last week.
In March, 104 servicemembers spoke with Navy legal service officers in Japan and Guam — a nearly fivefold rise since November, said Pacific legal services commanding officer Capt. Greg Belanger.
In several cases, Belanger says, Navy lawyers talked with clients about two new government measures designed to ease the national surge in foreclosures: the Home Affordability Refinance Program, or HARP, and the Home Affordability Modification Program.
"It’s not hard to talk with a mortgage company about these programs," Belanger said.
To qualify for HARP, a homeowner must not have been more than 30 days past due on a payment during the previous 12 months, said Lt. Graham Winegeart, the Navy’s Pacific civil law department head.
The loan must also be either owned or controlled by Fannie Mae or Freddie Mac, as about half of all mortgage loans in the United States are, Belanger said.
Homeowners can look up their loan’s ownership and check their eligibility for the program by calling their lender, or by going to http://makinghomeaffordable.gov/.
Even homeowners in relatively good financial shape should look into refinancing if they are paying a high interest rate, Belanger said.
The benchmark 30-year fixed mortgage rate stood at 4.89 percent Thursday, down from 6.46 percent in October, according to Bankrate.com.
The low rates mean that a standard loan might be a better option than going through HARP, said Barbara Sheehan, assistant vice president of mortgage products at Navy Federal Credit Union in Vienna, Va.
The interest rate can be about 0.75 points higher under HARP because the program allows the homeowner to borrow up to 105 percent of the home value.
While conditions like income and ability to pay still influence standard loan structures, a homeowner looking to borrow 90 percent of the home’s market value would likely get a better rate than under HARP, Sheehan said.
As of April 23, Navy Federal Credit Union had processed 1,667 HARP loan applications; however, 41 percent ended up going another route.
"Sometimes it doesn’t make financial sense because there’s not enough of a drop in the rate to give them a payment advantage, based on the closing costs," Sheehan said.
However, some of the credit union’s members take a slightly higher rate to move out of adjustable or balloon payment mortgages and into fixed-rate mortgages, Sheehan said.
Meanwhile, the Home Affordability Modification Program is for people in more dire financial straits.
The homeowner’s mortgage payment must be more than 31 percent of their gross monthly income, Winegeart said.
The lender could then lower the payment and rate below the 31 percent threshold.
The modification is principally meant for families who have lost a large portion of their income.
"The [acceptance] criteria really has to do with what caused the hardship and the willingness to fix it and stay on property," Sheehan said.
Legal officials say they have seen people with hardships empty out their retirement accounts and savings, and they still can’t pay their mortgages.
Before doing anything like that, consult an attorney or meet with a financial planner, says Michael Spiltener, who coordinates free financial education classes at Yokosuka’s Fleet and Family Support Center.
Both legal and financial services are free for servicemembers and many Defense Department civilians.
Base financial planners can help develop plans to avoid losing retirement funds and financial safety nets — which in this economy should mean a six- to 12-month cash reserve, especially for those leaving the military, Spiltener said.
Although the military can take adverse action against servicemembers who fail to manage their finances, that isn’t the support center’s role, Spiltener said.
"We’re not going to run to their commands and say, ‘This guy is in trouble,’ " Spiltener said. "We’re here to help them."