HARP Program News: Version 2.5 Anyone?

It’s been years since the HARP program was first introduced and millions of underwater homeowners with privately held mortgages are still waiting for HARP 3. If you’re paying on an underwater mortgage held by a private lender like Bank of America or Wells Fargo instead of Fannie Mae or Freddie Mac, the news out of Washington these days has been less than encouraging. Here’s the latest HARP program news you need to know regarding your underwater mortgage loan.

HARP Program Update

HARP 3 is long overdue and has been rumored to remove the Fannie Mae, Freddie Mac requirement opening the door to refinancing privately-held mortgage loans for millions of financially responsible Americans. That’s what President Obama promised in his State of the Union Address right…help for financially responsible underwater American homeowner?

The HARP program has only been open to Fannie Mae or Freddie Mac mortgages leaving millions of Americans with privately-held home loans out in the cold. These are the same privately-held (including subprime) home loans largely responsible for the mortgage crisis.

New HARP bills come and die in Congress every year; however, the Fannie Mae and Freddie Mac requirement remains largely because investors have a stake in these mortgage loans and stand to lose a ton of cash by helping homeowners who are struggling to make their payments.

Obama Refinance Program Changes

President Obama hasn’t stopped fighting for a HARP program that’s open to everyone that needs help. HARP 3 isn’t gaining much traction in Washington but there is hope. One of the potential changes the President is looking to make is to push forward the HARP eligibility date.

While HARP 3 is part of the White House agenda, overcoming investor concerns raised by removing the Fannie Mae, Freddie Mac requirement remains a difficult issue. Removing this requirement is said to require more than the President’s executive order and would have to make its way through Congress before reaching the President’s desk to become law.

Unfortunately mortgage help for underwater homeowners is not a hot topic in Congress right now with the focus squarely on domestic terrorism rather than the housing crisis which “ended” several years ago.

Still, if HARP 3 doesn’t get approval there are other changes in the works to expand the HARP program worth noting. These changes have been dubbed HARP 2.5 by many professionals in the business.

HARP Program Eligibility Date

Under HARP 2 the cutoff date to be eligible for the Home Affordable Refinance Program is May 31st of 2009. This means that Fannie Mae or Freddie Mac must have purchased your mortgage loan before that date to be eligible. June 1st of 2009 or later is simply a day late and a dollar short until HARP 3 arrives.

If you don’t qualify for the HARP program and are underwater your only other option is a cash-in refinance. This means you’re bringing sufficient cash to the closing table to pay down your mortgage balance to a favorable loan-to-value ratio. The problem here is if you had that much cash lying around you probably wouldn’t be underwater in your home loan in the first place, so your HARP program eligibility wouldn’t be an issue.

This is little consolation for most privately-held underwater homeowners who have to wait for HARP 3 to arrive.

There is a shimmer of good news in that the proposed HARP program extension would push that cut-off date out to 2010. This only helps people with Fannie Mae or Freddie Mac backed mortgages that missed the May 31st, 2009 cutoff. (Still a significant number of responsible homeowners left out of the HARP party…)

This proposal is nothing new; it was part of bills sponsored by Robert Menendez and Barbara boxer in the Senate…also known as the place where good bills go to die. The most recent bit of legislation proposed by the duo is called the “Responsible Homeowner Refinancing Act of 2013.”

Whether or not the 2013 version of the bill will make it to President Obama’s desk is anyone’s guess at this point. The Responsible Homeowners Act of 2012 never did and died a quiet death in Congress.

What About Re-HARPing?

Another possibility is the option for people who took advantage of the HARP program the first years it came out to re-HARP. Mortgage refinance rates are quite a bit lower than they were several years ago making re-HARPing a beneficial feature for many homeowners.

The problem with proposed changes to the HARP program is that as more time passes there is less urgency for Congress or the President to take action. Part of the mentality is that if these underwater homeowners were going to default on their mortgages they would have done so already so why change a program that’s “clearly” working?

The upside of the housing recovery is that many areas of the country homes are beginning to appreciate, meaning fewer homeowners are underwater and in need of HARP 3.

If your home appreciates and you’re no longer underwater the chances are good that you’ll qualify for traditional mortgage refinancing and won’t need a government refinance program like HARP 3. (Assuming your credit is sufficient to quality for today’s refinance rates)

In the meantime stay tuned to RefiAdvisor for more HARP program updates.