FOUNTAIN HILLS, Ariz. -- Like half of the homeowners in the Valley, Veronica and Steven Hill are underwater on their mortgage.
“We purchased our home at $402,000 and it appraised at $250,000 for nothing that we've done,” Veronica said.
To help refinance their home at historically low interest rates, the Hills applied for the second version of the government's Home Affordable Refinance Program, or HARP 2.0.
When HARP 2.0 launched earlier this year, it was billed as being able to help homeowners no matter how upside down their mortgage is, or how extreme the loan-to-value ratio is.
“We were 100 percent within the eligibility range and we knew that,” Veronica said. “We knew our credit scores and everything so, according to what it was supposed to be, it should've just flown through the system.”
But instead of getting approved like they expected, the Hills were denied because they were considered a "credit risk" by Freddie Mac.
The couple says they were surprised and after looking into the issue further, they discovered the loan-to-value ratio on their home was the real reason they were denied, even though loan-to-value ratios are not supposed to be considered.
Sound confusing? It turns out, lenders are getting around HARP 2.0 rules by imposing their own loan-to-value ratios. In the Hills' case, their lender thought they were too upside down, so they turned them down.
“It's ridiculous! They're not helping,” Veronica said.
Mike Metz owns Sun State Home Loans and has submitted hundreds of HARP 2.0 applications.
He points out participating in HARP 2.0 is completely optional for banks and they are allowed to play by their own rules, regardless of what Fannie Mae and Freddie Mac say. Look up a list of banks participating in HARP 2.0 near you. Click here to find out if your bank is backed by Freddie Mac.
He says roughly 75 percent of homeowners who apply through him are getting approved. But some, like the Hills, still get caught up in red tape, especially when their home is backed by Freddie Mac.
“I don't know why we're getting different sets of rules, guidelines, and finding from Freddie Mac and not from Fannie Mae," Metz said. "But I'm certain it’s there because you can see many lenders are not participating in the Freddie Mac program right now.”
Nonetheless, after reviewing the Hills' case, Metz managed to tighten the gap in their loan-to-value ratio enough to where their lender approved it.
That means they're monthly mortgage payment is now $500 cheaper.
3 On Your Side called Freddie Mac. A representative said they're aware of the problems people are having and are rolling out updates to HARP's guidelines so more homeowners can get the help they need.