Surprise! HARP 2.0 Changes Again

The government is trying to make HARP 2.0 available to more underwater homeowners by changing the refinance program guidelines. Qualifying for the Home Affordable Refinance Program (HARP) is easier with the new guidelines used by Fannie Mae and Freddie Mac. Here’s what you need to know about the revised HARP 2.0 to get your mortgage refinance approved with today’s best mortgage lenders.

Government Refinance Program HARP 2.0

HARP, commonly referred to as HARP 2.0, is the government refinance program known as the Home Affordable Refinance Program. Started by President Obama in 2009, the program has a two-fold purpose, stimulate the economy by helping underwater homeowners refinance their homes with today’s low mortgage rates. The idea is by lowering mortgage payments for millions of homeowners that have not been able to refinance they’ll have more cash to spend which would boost the economy.

The fact that the government would rather you spend your cash than save is alarming for some, but hey, it’s an election year right?

If you’ve lost equity in your home and have a poor loan-to-value ratio or are completely underwater you can refinance as long as you meet the government refinance program requirements.

HARP 2.0 Eligibility Requirements

The requirements for the Home Affordable Refinance Program are fairly easy to meet, provided Fannie Mae or Freddie Mac securitized your mortgage before May 31st, 2009.

If your mortgage isn’t backed by the government and is held by a private lender like Bank of America or Wells Fargo you’re still not eligible for this government refinance program, but more on that in a moment.

1. Your mortgage must be held by Fannie Mae or Freddie Mac
2. The government must have backed you before 5/31/2009
3. You must not have late payments for the last 6 months
4. You must have paid on time for 11 of the last 12 months

HARP allows for any loan-to-value ratio meaning it doesn’t matter how drowned your equity is, if you meet the requirements above you’re in the program. Because loan-to-value doesn’t matter your lender won’t order an appraisal. It doesn’t even matter if you’re paying PMI (Private Mortgage Insurance), you can qualify. Paperwork and verification are minimal and lenders routinely close refinancing within a month.

So What’s Changing?

Under the old government refinance program rules in order to be HARP 2.0 eligible you had to have a verifiable source of income. This had to come from your employment, self-employment, or some verifiable source of non-work income like Social Security.

Under the new guidelines Fannie Mae and Freddie Mac can forego income verification as long as you’ve paid 11 of your last 12 mortgage payments on time. In the past your lender might still ask for income verification as part of a program overlay. Overlays are special rules lenders enforce above and beyond the government refinance program requirements to limit risk for investors. Under the old rules you could meet all of the HARP 2.0 program requirements and still have your application denied because of the lender’s overlay.

As long as you can document that you’ve faithfully paid 11 of your last 12 mortgage payments on time including taxes and insurance lender overlays for income verification should not prevent you from qualifying.

You may be required to provide account statements to document how you’ve been making your mortgage payments but a lack of verifiable income should no longer prevent you from refinancing under HARP 2.0.

In addition to eliminating the income verification requirement Fannie Mae and Freddie Mac have reduced the amount of paperwork for a HARP refinance, thus streamlining the process.

These looser program guidelines are expected to open the program up for 1 million households that could not qualify before based on income verification.

Not With Fannie Mae or Freddie Mac?

Unfortunately if your mortgage is not backed by Fannie Mae or Freddie Mac you are still not eligible for HARP. Rumors that HARP 3.0 will eliminate this requirement are still circulating. The government is on a buying spree for mortgages not backed by Fannie Mae and Freddie Mac which is a good sign of things to come.