Refinance Program Overhaul


Yesterday (10/24/11) President Obama announced plans to overhaul the Home Affordable Refinance Program (HARP).  HARP was originally introduced by President Obama shortly after he took office in 2009.  It was scheduled to expire in June 2012 but now will be extended through the end of 2013.  The goal of HARP is to help borrowers with less than 20% equity in their homes refinance their mortgages.  To date, the program has helped 894,000 people refinance their homes.  The Federal Housing Finance Agency (FHFA) estimates that another 800,000 to 1 million borrowers should be able to refinance under the new HARP guidelines.  That is good news for those people but there are many more who won’t qualify.  CoreLogic, which tracks data on 85% of all mortgages in the United States, estimates there are another 20 million people with equity in their homes who could reduce their interest rate 1% or more by refinancing.  That is roughly 25% of all homeowners in the U.S.  I’m sure that HARP will do some good for our economy and housing markets but I do wonder what it would take to drop the interest rate on all those other mortgages.  I’m not trying to get political but the taxpayers just bailed out the banks.  Why can’t they drop the interest rate by 1% on all mortgages obtained before 2009?  I know it’s not that easy but it only seems fair.

Here is a summary list of eligibility requirements for HARP according a press release by FHFA:

*    Borrowers must be current on their loan for the previous six payments and have no more than one late payment in the last 12 months.

*    The existing mortgage must be a Fannie Mae or Freddie Mac loan.  Click the links to determine if your loan is backed by either agency.

*    Your loan amount must be equal to or greater than 80% of the value of your home.

*    Beginning early next year, the loan to value limit of 125% will be removed.  This means that no matter how far under water people are on their homes, as long as they meet the other requirements they will be able to refinance.

*    It should be noted that the program will not reduce the amount of principal owed.  It is only intended to help borrowers reduce their interest rates and payments.

*    If you bought your home or refinanced since May 31, 2009 you are not eligible to refinance using the HARP Program.

*    One of they keys to the program is to reduce or eliminate many and in some cases all fees associated with refinancing.  To be eligible to wave all loan fees the term of the loan must be reduced in the refinance.  In other words, go from a 30 year loan to a 20 or 15 year loan.

*    Where Automated Valuation Modeling is available you will not be required to have your home appraised.

*    There is no mention in anything I read about how credit scores and income will affect borrower’s ability to qualify.

Call your lender to find out if you qualify for the HARP program.

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About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.