|What Everyone Should Know About the HARP Program|
What Is HARP?
HARP is the government's "Home Affordable Refinance Program," developed to give homeowners who are current on mortgage payments but who have low or negative equity in their home the option to refinance.
With 22.5 percent of mortgaged homes "underwater" in the U.S. in 2011 and interest rates tantalizingly low, you can imagine that this includes a huge number of people.
(Just to be clear, being underwater on a mortgage means owing more on the loan(s) than the property is worth. It does not have anything to do with being behind on payments or going into foreclosure, even though many properties that go into foreclosure are also underwater.)
Big Changes to the New HARP
When HARP first came out in 2009 applications for the program surged, but limits on negative equity and other restrictions prevented many people from qualifying.
The new HARP is another story. Announced in November 2011, "HARP 2.0" contains massive changes that make it much easier for underwater homeowners to refinance. Here are some highlights of what's different.
1. No loan-to-value limits.
This is a huge difference from the first version of HARP, under which homeowners could not refinance if they owed more than 125 percent of the value of their home. Now there is no loan-to-value limit as long as the refinance is to a 30-year or shorter term fixed-rate loan.
In other words, even if a homeowner owes three (or more) times more on the loan than the property is worth, they may still be able to refinance with HARP.
2. Applies to investment properties and second homes.
The old HARP was only for owner-occupied homes. The new version is a boon for many investors who bought rental properties in places like Las Vegas and Miami, then saw values plummet during the recession.
3. No minimum FICO score.
Credit scores are still examined and can play a part in whether or not someone ultimately qualifies for a HARP refinance, but there is no set lower limit as long as the new combined principal and interest payment is not over 20 percent greater than the old one.
4. Restrictions eased for condo owners.
The new HARP lets condominium owners refinance even if one person owns more than 10 percent of all units, or if over 20 percent of units in the complex are behind on homeowner dues.
5. No verification of employment or income.
Here's where things get a bit more complicated. (This is a government-run program, after all. :) There are two underwriting procedures for HARP: manual, and desktop underwriting (DU).
Right now the only option is manual underwriting through the original lender, and in this scenario no income or employment verification is required as long as the new combined principal and interest does not increase the payment by more than 20 percent.
Fannie Mae and Freddie Mac's automated desktop underwriting system will become available in March. This opens up the field for homeowners to refinance with other lenders, but also means that they will need to provide verification of income and assets, along with other qualifying criteria.
Bottom line: Check with a knowledgeable lender.
Because HARP 2.0 was announced relatively recently and modified again in December, there is an enormous amount of incorrect and outdated information out there.
The highlights above are only some of the features of the new HARP and everything is potentially subject to change, so the wisest option is to speak with a knowledgeable lender.
Who Is Eligible for the New HARP?
In order to qualify for HARP, the following requirements must be met:
1. The loan must have been acquired by Fannie Mae or Freddie Mac on or before May 31, 2009.
You can go to Fannie Mae
and Freddie Mac
online to find out if your loan is held by them, or call 1-800-7FANNIE or 1-800-FREDDIE from 8 a.m. to 8 p.m. EST if you need to also verify when they acquired your loan. (Believe it or not, you will probably get an actual human on the line to help you relatively quickly.)
2. No more than one 30-day late payment in the last twelve months, and none within the last six months.
3. HARP must improve the stability or affordability of the loan. For example, changing from an adjustable rate to a fixed rate fulfills this qualification.
4. This must be the first HARP refinance for the property, unless one occurred between March 1 and May 31 of 2009.
5. The homeowner must have less than 20 percent equity in the home.
HARP will be in effect through December of 2013.
Summary and Updates
An online summary that appears to be very up-to-date (at least right now) is the HARP page on Bills.com.
There's also the official Fannie Mae FAQ page (it opens as a pdf), and the government's "Making Home Affordable" HARP page.
FHA Streamline Refinance
This program is for underwater homeowners who have FHA loans and are current on payments.
This is the Home Affordable Modification Program, designed for homeowners who are falling behind on payments. (It provides loan modification, not refinancing.)
Are you planning to refinance soon, or wondering if you should? If so, please give me a call so that I can put you in touch with someone who will do a great job for you. My experience can save you time and money, so please take advantage of it!
(What the lawyers make us say: The information in this newsletter is deemed reliable but not guaranteed. Please always consult a qualified expert before making decisions based on this content. Nothing in this article is meant to be taken as expert legal, financial, or medical advice.)