With mortgage interest rates floating near four percent, mortgage industry analysts expect up to seven million homeowners to qualify under the new, expanded version of the Home Mortgage Affordable Program (HARP). The program will now help borrowers refinance to a low interest rate mortgage, even if their home loan-to-value ratio exceeds 125 percent of the actual market value of the home - a major roadblock under the original program.
Under the new guidelines, this restriction no longer applies. In many cases, you will not require an appraisal on the home.
This comes as good news to homeowners in states like Nevada, California, Michigan and Florida, where the number of underwater mortgages ranges from 36 to 63 percent.
To entice mortgage lenders to participate in the new program, the Federal Housing Finance Agency (FHFA), the conservator for Fannie Mae and Freddie Mac, will release lenders from certain defects discovered under many of the mortgages homeowners will refinance. This provision helps participatory lenders to put behind them the specter of legal repercussions in cases where misrepresentations, fraud and other improprieties took place.
The Acting Director of the FHFA, Edward J. DeMarco, made the following statement in a late October press release:
“We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco. “Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises.”
DeMarco went on to say, “Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”
Does Your Mortgage Qualify for HARP 2.0?
Borrowers still have to qualify for the mortgage. For starters, Fannie Mae or Freddie Mac must insure or own the mortgage.
How do you know if your loan qualifies for refinancing? Fill out HARP 2.0 Application.
When you apply for mortgage refinancing, present this information to your lender.
The rules require you to have up-to-date mortgage payments-- without a late payment over the past six months, and with a minimum of 11 on-time payment over the past year.
Another consideration when refinancing your mortgage, HARP refinances have to fall within the conforming loan limits for your area. In most regions of the country, the current conforming loan limit is $417,000. The limits go as high as $625,000 in cities with average home prices that are higher.
The program does not allow you to do a “cash out” refinance. HARP only modifies the mortgage interest rate and terms of the loan.
If you have lender-paid mortgage insurance (LPMI), or another mortgage insurance type, you cannot refinance your mortgage through HARP 2.0. Only “borrower-paid mortgage insurance” qualifies. Check your monthly mortgage statement, if you have PMI listed under other itemized charges, you can apply.
Other HARP Refinancing Criteria
You cannot refinance your home under HARP if you previously refinanced the home through the original HARP program. However, the program grants exceptions for the following scenarios:
- Borrower became an “accidental landlord” of a home previously refinanced through the HARP program.
- Borrower has a Fannie Mae loan, and the HARP mortgage refinancing occurred from March-May, 2009.
You may still refinance the home, but the program’s eligibility criteria still apply.
HARP permits borrowers to refinance the mortgage on investment or rental property, if you once reside in the home as your principal residence. Condominium and vacation homes can also qualify for refinancing to a low interest rate mortgage on HARP.
HARP refinances must go through the traditional income verification process. Even if you obtained the original mortgage as a “stated income loan,” also referred to a “no income verification mortgage loan,” the refinance process operates in the same manner as with the standard refinance practices.
You will require W-2 statements, recent pay stubs, tax returns and other documents usually requested by loan underwriters.
The FHFA does not compel the mortgage lenders to participate in HARP. Banks will implement the program according to their schedules, as they work with mortgage insurers and other firms to adjust their procedures.
If you determine your mortgage dose not qualify to refinance under HARP, contact your lender to discuss other low interest rate loan programs or even a lender-based mortgage modification. If you have an FHA guaranteed mortgage, go through the FHA Streamline Refinance Program.