Are you underwater in your existing mortgage and haven’t been able to take advantage of low refinance rates offered by today’s best mortgage lenders? The Home Affordable Refinance Program was judged a failure because of its restrictive loan-to-value ratio requirements; however, new rules created by President Obama’s executive order have gone into effect and you might want to give HARP a second look. Here are the basics you need to know about HARP 2.0 that could save you thousands of dollars getting you qualified for mortgage refinancing.
New Rules Changed for the Better
HARP 2.0 has been rolled out for several months now; however, HUD recently automated the process for lenders. Under the old systems underwriting had to be processed manually bogging underwater homeowners down in unnecessary red tape. New software and easy qualifying should allow millions of underwater homeowners to qualify for low mortgage refinance rates previously out of reach.
Under the new HARP program the value of your home doesn’t matter. It doesn’t matter how underwater you are. The old HARP program had a restrictive 125% loan-to-value limit. This meant the amount you owe could not be more than 125% of the value of your home. The new rules eliminate loan-to-value from the equation completely.
The new HARP program may also not require you to pay for an appraisal. The new underwriting process allows for automated appraisals. If the lender you’re working with allows automated appraisals they will estimate your home’s value electronically not requiring you to pay for a new appraisal. Since there is no loan-to-value requirement under the new HARP program the current market value of your home is not an issue. This is good news because paying for a new appraisal could cost you as much as $500. This is an expense lenders are not willing to waive.
New HARP Program Fees Reduced or Waived
If you choose to refinance your home with a term-length less than twenty years Freddie Mac and Fannie Mae will waive their delivery fees on your new home loan. Term length is the amount of time you have to repay the mortgage and along with your refinance rates determines your monthly payment. These fees are being waived to encourage mortgage refinancing with home loans that build equity at an accelerated rate to help get you right-side-up in your new home loan.
Lender fees for high-risk homeowners have also been discounted. Because the refinance mortgage rates you qualify for are risk based being underwater will result in paying higher interest rates than if you were right-side-up. The rules limit risk-based price adjustments to keep mortgage refinancing beneficial for underwater homeowners. This means you’ll qualify for refinance rates close to what the top mortgage companies like Amerisave and Navy Federal Credit Union are offering.
Less Risk For Lenders Too
HARP 2.0 offers incentives for lenders to participate. The government does this by not holding lenders accountable for losses from the underwater mortgage. Lender participation is voluntary so the government has attempted to sweeten the deal for lenders to encourage them to participate. Because it is voluntary for lenders you may encounter lenders not participating or unwilling to approve your application. If this happens don’t get discouraged; simply move on to the next lender until you find one willing to approve your mortgage refinancing.
Under the new rules you’re not required to stick with your old lender. Because there are fees associated with any refinance mortgage loan it will be in your best interest to shop around for the best deal. You may even find your current unwilling to approve your application under HARP. Remember participation is voluntary for lenders and some banks have said they will only approve applications for their existing customers.
The New HARP Program Rules
There are several HARP requirements that did not change under the new program. The biggest roadblock you’re likely to encounter is that your current home loan must be backed by Freddie Mac or Fannie Mae. If they don’t have your mortgage then you’re done…HARP is not an option for you. HARP is a government program that requires government backing of your mortgage in case of default.
In addition to the Fannie/Freddie requirement the government must have acquired your home loan before 6/1/2009. If Fannie and Freddie back your mortgage you must also be current on your payments for the past six months and can have only one late payment during the six months before this period. Qualifying is time-sensitive and eligibility will close December 31st, 2013 so if you qualify, don’t procrastinate.
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You can learn more about getting today’s lowest refinance rates while avoiding unnecessary points and fees with or without the new HARP program by checking out my free Underground Mortgage Videos.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
We were in the middle of a HARP refinance with Wells Fargo on one of our rental properties when, after 3 weeks of signing the GFE, and faxing a stack of required documentation, the processor called to tell me their lender said we could not refinance because the property was under our LLC. So we paid $140 to an Escrow company to get our property out of the LLC, and now Wells Fargo says it has to be out of the LLC for six months before they can refinance. To add insult to injury, they are tossing all the paperwork we signed and submitted, and said we would have to start the process all over again in six months. We have been paying 7.125% interest on this mortgage for years. We also own a second townhouse in the same development that also shows that it is owned by Freddie Mac. But Wells Fargo says they do not show it is owned by Freddie Mac so it is not eligible for the HARP program? We’re paying 6.750% on this mortgage. Is there anything we can do?