With more than 11 million homeowners underwater on their mortgages, 2008’s HARP (Home Affordable Refinance Program) mortgage has been updated to allow more homeowners to refinance their mortgages, taking advantage of today’s historically low interest rates. AKA: HARP 2.0…
The first edition of HARP was a great idea, in theory anyways. If the banks, lenders, and servicers implemented the program exactly as it was written it would have helped many millions of homeowners refinance to lower interest rates, lowering their payments, and even probably had a positive effect on the national housing market and overall economy as less of those homeowners would have lost their homes and had more money in their pockets to spend.
But that’s not how it happened, the banks and servicers applied their own “overlays” to the program’s guidelines, making it hard for many underwater homeowners to qualify. Because of this only about 800,000 homeowners were able to take advantage and lower their rate/payment.
In comes HARP 2.0, with easier guidelines for borrowers to qualify, now unlimited Loan-To-Value ratios are allowed, as well as “Representation & Warrants” requirement waivers, relieving lenders of almost all Reps & Warrants of the original loan, making it much more likely that they participate. The Federal Housing Finance Agency estimates that at least another 1 million homeowners will benefit from a HARP 2.0 refinance before expiration of the program at the end of 2013.
Here are some important facts!
- The current loan must be backed by Fannie Mae or Freddie Mac. You may not know your loan is backed by either of these entities because you make your payment to someone else (Bank of America or Wells Fargo for example) but in reality they are probably just the servicer of your loan and the security was at some point sold to Fannie/Freddie. I can quickly help you do this search to find out.
- The current mortgage must have been originated before May 31st, 2009.
- HARP loans are available for all occupancy types (primary residence, second home, and investment properties).
- The mortgage must have not had a 30 day late payment in the past 6 months, and must have had no more than one 30 day late payment in the last year.
- The current Loan-To-Value ratio must be over 80% (otherwise you may already qualify for a non-HARP refinance)
- Except for a small exception for some of the earliest HARP refinances in March-May of 2009, those that have previously refinanced under the HARP program will not qualify.
- Both Fannie and Freddie’s guidelines are nearly the same but Fannie Mae’s are actually a little bit more liberal (which is a good thing as they hold many more HARP-eligible loans than Freddie Mac does).
- Loan-Level-Price-Adjustments (LLPA’s), fees added on that can increase closing costs, the interest rate, or both (depending on how your lender structured your scenario) have been drastically reduced for HARP 2.0 loans. This was one of the issues with HARP the first time around, LLPA’s would make it very tough to refinance as they would add up to a point that HARP borrowers were no longer eligible for the lowest rates. Under the new program it’s feasible for a HARP borrower to get a lower rate than an non-HARP borrower because of the LLPA cap.
- Property Inspection Waivers (PIW’s) are the big one here. Under the new rules lenders will be issuing PIW’s allowing the HARP borrower to not have to have an appraisal at all. Not only making a lot of these refinances possible, but saving consumers a few hundred more dollars in the process! PIW’s will not be issued on all refinances, but they will be on many (I can tell you before you shell out $400 for an appraisal if your loan was issued a PIW).
This is great news for homeowners who have made it a point to keep up with their payments! With the updated guidelines rolling out in March eligible homeowners in this category may be able to take advantage of HAPR 2.0 in the very near future. And even if you did miss a payment this program is available through December 2013. If you can get and stay current for the next 6 months, you may be eligible too.