New Hope for Homeowners Too Far Underwater on Their Mortgage

The Federal Housing Finance Agency recently announced dramatic changes to refinance assistance under the Home Affordable Refinance Program (HARP). HARP, other than the FHA streamline refinance, is unique in that it enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits.

Over 9 million families with Freddie Mac and Fannie Mae loans have taken advantage of the original HARP program and refinanced for lower monthly payments or a more suitable mortgage product. For homeowners way underwater, the revision to the existing program offers the hope of lower mortgage payments and the possibility to avoid a short sale or foreclosure.

The new changes to the program (HARP 2) provide the following for eligibility for homeowners underwater on their mortgage:

• If your new HARP loan is a fixed rate loan, it doesn’t matter how much your loan balance exceeds your home’s value if you have a fixed rate loan. The original program limited loans to 125 percent LTV. Your loan balance must be greater than 80% of your home’s value. If your new HARP loan is an ARM, your loan balance can’t exceed 105% of your home’s value. Your loan amount is subject to current conforming lending limits.
• Your loan must be owned by Fannie Mae or Freddie Mac and must have closed on or before May 31, 2009. Your current loan cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
• Condo and single family home loans are eligible provided they are owner occupied properties. Properties originally purchased as an owner occupant and lived in a year and is now a rental do qualify.
• You must be current on your exiting loan which is defined as follows: No late payments for the past six month and a maximum of one late payment for the past 12 months.
• Your new HARP loan must close by December 31, 2013.
• You can obtain a HARP refinance mortgage with any lender, however the closing costs may be lower and the process much quicker with your existing lender. The loant must close by December 31, 2013.
• You can only refi first mortgages into new HARP loans. You can’t combine first and second mortgages, but you can subordinate your existing second mortgage behind a new HARP first mortgage, If the second mortgage holder approves it.
• Only first mortgages can be refinanced and you cannot combine first and second mortgages. If you have a second mortgage, you can refinance the first with second lien holder approval.
• Lenders could start the pre-qualifying process for eligibility on November 15, 2011. Participation in the program is not mandatory so you have to change lenders to obtain a refi loan.

Contact you lender to determine if you qualify for a refi under the HARP 2 program. Since the details have just been released, be patient with the process as your lender will need to work through all the requirements of the program. Changes have been made to facilitate the appraisal and a quicker closing. If you change lenders, the process can take substantially longer.

This information was provided by Fred Doleac, Broker/Owner of Virtual Homes Real Estate which provides services in NH and MA and specifically buyers searching for Boston real estate.