Under new rules coming on line, HARP is now available for refinances no matter how far your home is underwater. The 125% loan-to-value cap is no more.
The purpose of the Home Affordable Refinance Program has been to enable homeowners who could not otherwise qualify for a refinance do so, thereby getting a lower interest rate and lower monthly payment, making more likely that they could afford to stay in their homes.
Until this revamped version of HARP, homeowners could not qualify if their existing mortgage was more than 125% of the value of their home. In the new improved version announced way back in October, this condition was eliminated. But it has taken until a few weeks ago for Fannie Mae and Freddie Mac to release their formal guidelines, update their approval software, and start getting lenders on board.
In this blog I will give you a short list of the main conditions for HARP 2.0 eligibility, and then provide a few good sources for more detailed information.
1. Your mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac. Why? Because these entities were effectively taken over by the government near the beginning of the real estate market crash, and so the federal government can require them to follow new refinancing rules. HARP operates through Fannie and Freddie, and so loans owned by private lenders aren’t in the program. However, a large majority of home mortgages are held by Fannie or Freddie, so there’s a good chance yours is as well. You can find out by checking these two websites: www.fanniemae.com/loanlookup or www.freddiemac.com/mymortgage. (If you instead you have a VA, FHA, or USDA home loan, they each have their own refinancing programs.)
2. Your loan must have been sold to Fannie or Freddie on or before May 31, 2009.
3. Your loan was not refinanced through HARP previously. No second bites at this apple. One small exception—if you happened to refinance your Fannie Mae mortgage from March through May of 2009. Also, prior non-HARP refinances are not a problem.
4. Your current loan-to-value must be greater than 80%. Although HARP is not limited to underwater loans, you can’t have more than 20% equity. Presumably, homes with an equity cushion are either more likely to be refinanced on the private market, and any event their owners will be motivated to preserve their equity. The point of HARP is to enable refinances which could not otherwise happen, and to give help and motivation to homeowners who have little or no equity.
5. Must be current on the mortgage—no late payments in the last 6 months, maximum of 1 in the last 12 months. Given that this program will leave the homeowner with a loan with little or no equity, and often with serious negative equity, the borrower must show a very clean recent payment history. However, many other requirements have been loosened, for example automated appraisals will be permitted instead of needing on-site ones (since the home value is not important here), and income verification will be less often required, making self-employed people more likely eligible.
CAUTION: Lenders have a fair amount of discretion to alter these rules, so refer to your lender for the details, and it may well be worth shopping for eligibility and better refinance terms.
Resources for More Information
1. A good general new story about the HARP changes, from the website edition of the Philadelphia Inquirer.
2. The best detailed description I could find of the new program, in a website called bills.com.
3. Some experts’ opinions about the impact of HARP 2.0 in a Wall Street Journal blog.
4. A HARP 2.0 eligibility calculator on Zillow.com.