Sweeping Changes to Home Affordable Refinance Program

by Ask Kate
(October 24, 2011)

Ask Kate reports Sweeping Changes to Home Affordable Refinance Program to make refinancing your mortgage easier! Just today, the Obama Administration in conjunction with Fannie Mae and Freddie Mac have announced major changes to the Home Affordable Refinance Program (HARP) to boost much needed refinancing opportunities.

Why Home Affordable Refinance Program Exists

With little to no equity in their homes and unaffordable monthly house payments, thousands of homeowners have been deeply disappointed after a failed Home Affordable Refinance Program (HARP) process.

Anyone who has applied for HARP knows what I'm talking about.

Hopefully this is about to change.

The Home Affordable Refinance Program, also known as HARP, was created by the Obama Administration to assist homeowners with timely mortgage payment history, but who are unable to refinance due to plummeting real estate values. Owing more than a home is worth, also known as being underwater, is an increasingly common situation among homeowners. Approximately 11 million borrowers are currently underwater on mortgages.

Mortgage lenders typically require a specified percentage of equity to refinance a home mortgage. Enter HARP to the scene 2 years ago and struggling homeowners could theoretically refinance their mortgage even if they were underwater, up to 125 percent loan-to-value for fixed rate mortgages and 105 percent for adjustable rate mortgages.

What's New With Home Affordable Refinance Program

Sweeping Changes to Home Affordable Refinance Program include...

1. REMOVE the 125 percent loan-to-value ceiling.

2. ELIMINATE property appraisals when reliable AVM (Automated Valuation Model) estimates are available.

3. WAIVE certain fees for HARP borrowers who refinance into shorter term mortgages, for example from a 30 to a 15 year term.

4. REDUCE certain fees charged by Fannie Mae and Freddie Mac.

5. EXTEND the Home Affordable Refinance Program through 12/31/2013.

Ask Kate Tip: To calculate loan to-to-value, divide a mortgage balance by the value of a home. For example if your combined 1st and 2nd mortgage balances are $300,000 and the value of your home is $200,000, your estimated loan-to-value is 150 percent.

Home Affordable Refinance Program Fine Print

To be considered for the Home Affordable Refinance Program, a mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Borrowers will be current on their last six mortgage payments and be able to verify a source of income.

Of course, there is additional fine print so contact your lender to see if you qualify. You can also shop competing interest rates and mortgage closing costs among various lenders who participate in the HARP program. (Borrowers who are currently required to pay private mortgage insurance might be restricted to a HARP refinance with their current lender.)

I'll send out more news, as it is available, regarding how you can benefit from these changes. Lenders probably won't start originating under the new guidelines until there is further direction and clarification. So that means you can use the in-between time to...

1. Shop and compare mortgage rates and lenders online.

2. Get your ducks in a row with my Mortgage Information Planner Checklist.

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Best wishes,

More Ask Kate Questions and Answers at
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