The HARP loan program is a Federal program rolled out by the Obama Administration in March of 2009
The program helps underwater and near-underwater homeowners with harp 2.0 refinance their mortgages. It was designed to help responsible homeowners who are current on their mortgage payments take advantage of low rates, even though the value of the home has declined due the recent housing crisis. If you owe more than your home is worth a HARP refinance can help by refinancing you into a much lower payment without having to pay extra principal or mortgage insurance (PMI) (Please note – the total finance charges may be higher over the life of your loan)..
Why Are HARP 2.0 Loans So Great?
Take for example a house that was purchased in 2005 for $275,000 but is now worth $200,000 due to the housing market correction. Further, assume the homeowner owes $250,000 on the mortgage. In this scenario, the loan-to-value ratio would be 125%, and if the homeowner wanted to refinance, he would have to bring a significant amount of cash to closing to get his mortgage “above” water. Since lenders require a loan to value of 80% in order to avoid mortgage insurance that means the homeowner would have to come up with $50,000 at closing in order to refinance into to a lower rate!
The good news is that if you are eligible for the harp loan program it does not matter how underwater you are on your mortgage, you can refinance into a much lower payment. In many cases without having to bring any money to closing or having to get an actual appraisal completed.
What Are the Advantages of HARP 2.0?
- No equity required
- No appraisal required
- No mortgage insurance
- Reduced documentation
- Flexible underwriting guidelines
- Subordination of 2nd mortgage OK
- Lower closing costs than other loans
- Build equity faster by shortening your term
What Are the Eligibility Requirements?
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae
- The mortgage must have been endorsed 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
- The current loan-to-value (LTV) ratio must be greater than 80%
- The borrower must be current on the mortgage at the time of the harp loan, with a good payment history in the past 12 months
Have a look at our recently updated ebook on the “Simple Steps To A HARP 2.0 Loan”
New Updates To HARP refinance
Since the implementation of the Home Affordable Refinance Program (HARP) it has gone through many changes some good some bad. Recently many of the negative barriers that were keeping many homeowners from refinancing through the HARP 2.0 program have been lifted. Below are some of these key elements that have been removed to help more homeowners take advantage of historic low rates.
Both Fannie Mae and Freddie Mac have adjusted their automated underwriting system (AUS) to allow for more homeowners to qualify for what’s called an appraisal waiver. Just like it sounds by qualifying for the waiver a traditional appraisal will not be required in order to refinance. This makes the process very quick and simple for a homeowner to lower their interest rate or even their mortgage term.
Loan To Value Limits Eliminated
By far the biggest change to the HARP 2.0 program that has had the most positive impact is the elimination of loan to value caps. In other words, there is no longer a limit to how much negative equity you can have. Until this recent change anyone who had negative equity greater than 25% would not able to qualify for the program. This of course was a major obstacle especially in hard hit markets like Atlanta, Georgia and Miami, Florida where some homeowners who purchased homes before the bubble burst saw their home values fall 40% to 100%. This update has help many homeowners refinance into a much more affordable payment.
Mortgage Insurance Transfers
You can now transfer your current mortgage insurance from your current servicer to your new servicer by refinancing through HARP 2.0. Previous to this update some mortgage insurance companies would not allow homeowners to transfer their mortgage insurance in order to refinance. This prevented many homeowners from taking advantage of the program and refinancing into a lower payment.
Subordination of 2nd Mortgages
Many homeowners who can benefit the most from HARP 2.0 purchased their home prior to June 2009 which in many cases means they have a combo loan or a 1st and 2nd mortgage. The change to allow subordinations of a 2nd mortgage allows homeowners to refinance their 1st mortgage by getting permission from the 2nd lien holder to keep their mortgage in place. In the past this was a challenge and disqualified many borrowers. Luckily this was revised and has increased the number of eligible homeowners considerably.
Affordability and Cost
The cost of participating in the HARP 2.0 program has also been going down since it was first released back in March 2009. Recently caps were put in place to limit the fees and rate increases banks can charge for borrowers that qualify. This has made the program more affordable, reduced the overall cost and has increased the net tangle benefit for many borrowers. Especially homeowners that have lower credit scores, loan amounts, or that have a 2nd mortgage they need to subordinate in order to refinance.
Are You Eligible For HARP 2.0?
The Home Affordable Refinance Program (HARP) is one of the most powerful tools for underwater homeowners today. It is often the only refinance option for homeowners who lost equity in the recent housing crisis.
A HARP loan allows borrowers to be upside down on their mortgage and still refinance. Regardless of how upside down you are, if you have mortgage insurance, or if you have a 2nd mortgage you can benefit from the HARP 2.0 program.
The most important requirement is that Fannie Mae or Freddie Mac must own your loan. Find out below if Fannie Mae or if Freddie Mac own your loan.
If your loan is owned by Fannie Mae, you may check your potential eligibility for HARP here.
If your loan is owned by Freddie Mac, you may check your potential eligibility for HARP refinance here.
Disclosure: Even though a lower interest rate can have a profound effect on monthly payments and potentially save you thousands of dollars per year, the results of such refinancing may result in higher total finance charges over the life of the loan.