HARP 2.0 expected to help homeowners in 2012

Posted On: December 2011

Editor: Tiffany Brewington

The Home Affordable Refinance Program, or HARP, was originally created in 2009 with the goals of helping struggling homeowners refinance into lower rates. December 1, 2011 marked the beginning of the newly revamped HARP, or HARP 2.0 as it is being dubbed, whose goal is to implement important changes to the underperforming Obama program.

HARP was originally intended to assist homeowners who would qualify income- and credit-wise under normal mortgage requirements. However, with declining home values, these homeowners were unable to refinance due to the loan-to-value restrictions. The new program eases eligibility rules for borrowers which did not meet the original HARP guidelines, and is expected to help many additional homeowners take advantage of historically low interest rates.

What are the main differences between the new HARP program and the old one?

The original HARP only helped borrowers who owed up to 105% of their home’s value. This was later increased to 125%, and has now removed the 125% cap. This allows certain qualified homeowners to refinance their mortgage regardless of how underwater they are.

According to Making Home Affordable, which is Obama’s 2009 program designed to help millions of struggling homeowners restructure or refinance their mortgages, there are certain guidelines which must be met in order to take advantage of a HARP refinance.

A few eligiblity guidelines include:

  • The home must be your primary residence
  • You must be current on your mortgage payments
  • There must be no late payment in the past six months, and no more than one late payment in the past 12 months
  • Only mortgages sold to Fannie and Freddie on or before May 31, 2009, are eligible
  • Borrowers with second mortgages will still need the approval from their second lenders to refinance through HARP

Setbacks for homeowners trying to utilize the new Home Affordable Refinance Program include the missed payments rule, delays in lender’s loan application software, and non-mandatory lender participation. Homeowners may need to wait to attempt the program until they fall into guidelines with the six months of no late payments. Also, lenders who do not manually underwrite their mortgages may have to wait for software updates to do so, forcing many lenders to be unable to roll out their program until 2012. Finally, the program is not entirely voluntary by lenders to participate in. Freddie Mac does provide a list of participating lenders which can be viewed here.

For homeowners who are certain they do not qualify, it’s important to remember that just because they may be making their payments to Old Second Bank, doesn’t mean that Fannie or Freddie doesn’t own their loan. They should check both GSE’s websites or with their lender to confirm: Freddie Mac and Fannie Mae

According to John Folan, Illinois Licensed Loan Officer for American Midwest Bank, consumers are lining up for the program, which will be available at his bank in the first quarter of 2012. “Up until this point, people who were upside down on their loan by more than 125% had no outlet to refinance…so they may currently have interest rates as high as 7%. I have also seen some at 85% LTV in some cases, and now they can get their rates in the lower 4's,” states Folan. What is an example of the savings one could expect? “I have seen some at over $500 a month,” according to Folan.

To use an online tool to see if you may be eligible, and to see complete eligibility requirements, visit the Making Home Affordable Website here

About the Author: Tiffany Brewington is an Illinois Licensed Realtor and foreclosure specialist with Chicagoland Residential Realty. Contact her here

Have a HARP question or other mortgage question in general? John Folan is an Illinois Licensed Loan Officer. Please write to him here call him at 630.932.8700.

Posted On: December 2011

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