HARP (not the kind that makes music)
You may have heard mention of “HARP” in the last few weeks. While the news was music to my ears, it was not referring to the popular stringed instrument. HARP stands for the Home Affordable Refinance Program. It’s a government sponsored program that is meant to encourage consumers NOT to walk away from their mortgage. If you have a property that is currently underwater and your interest rate is at 6%, you are generally stuck. People across the nation are getting loans at 4% but you do not have the equity to qualify. It can get tempting to walk away from the home and debt obligation…no one wants to pay 30%above market interest on a house with negative equity.
The HARP program was created to allow underwater home owners, with mortgages owned by Fannie Mae or Freddie Mac, that are CURRENT on their mortgage payments to refinance into market rates. The idea is to help prevent strategic foreclosures. Until recently, the maximum loan-to-value for the program was 125%. Six weeks ago, the program was revised to remove the loan-to-value cap altogether. This is interesting as it opens the program to a LARGE group of home owners.The “catch” is that the lenders have to play along. Even though Fannie Mae and Freddie Mac have previously allowed up to 125% loan-to-value, there were a select number of lenders that would also allow up to this amount (most had internal caps at 105% – 115%). As part of the program revisions, the government revised their lender agreement to limit the lender’s liability in making the loan. This was done to encourage the lenders to work with the program’s maximum guidelines.
We are anxious to see how the lenders will react and what they will be offering to the public. Most lenders are planning to update their programs early next year. I’ll let you know when the guidelines come out!
Here’s a link to Federal Housing Finance Agency News Release: http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf
Here’s a quick summary of the new BASIC program guidelines:
- Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
- You must be current on your mortgage at the time of the refinance with a good payment history over the last twelve months.
- The current loan-to-value (LTV) ratio must be greater than 80%.
Here are links to see if your mortgage is owned by Fannie Mae or Freddie Mac:
Fannie Mae: http://www.fanniemae.com/loanlookup/
Freddie Mac: https://ww3.freddiemac.com/corporate/
