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The Responsible Homeowner Act of 2012

Have you been eying today’s low refinance rates but don’t have the cash for closing? If you’re underwater in your exiting home loan mortgage refinancing may have been out of reach. The Home Affordable Refinance Program (HARP) promised to help but only if your mortgage was backed by Fannie Mae or Freddie Mac, leaving millions of homeowners out in the cold. Here’s what you need to know about the Responsible Homeowner Act of 2012.

Your Rich Uncle Wants You to Refinance

Sponsored by Senators Barbara Boxer of California and Robert Mendez of New Jersey, the Responsible Homeowner Act (called HARP 2.5 by many) wants to remove any and all barriers to mortgage refinancing. This law aims to eliminate out-of-pocket expenses without taking a higher mortgage rate to get your fees paid by the lender. This legislation takes HARP 2.0 a step further which until now has failed to help underwater homeowners take advantage of today’s low refinance rates.

In order to qualify for mortgage refinancing under the Responsible Homeowner Act you must be current on all of your payments. HARP had the requirement of no late payments during the past six months and a maximum of one late payment during the six months before that period.

The bill essentially allows for a streamline refinance for all home loans backed by Fannie Mae or Freddie Mac, regardless of how underwater you are. The Fannie Freddie requirement is rumored to go away under HARP 3.0; however, this requirement remains for a streamline refinance.

What is a Streamline Refinance?

FHA homeowners have had streamline refinancing available to them all along; essentially, this type of transaction reduces paperwork and fees. There is no need for employment or income verification and your credit score isn’t part of the equation.

The bill wants to increase competition between lenders meaning homeowners will be able to shop for the best refinance rates. Lenders have the option of sending out pre-approval letters to their existing borrowers that will only need to be signed and sent back to get the ball rolling.

This type of streamline refinance eliminates upfront fees at closing and does not require an appraisal. Because the loan-to-value ratio has been eliminated from the program completely having your home appraised is no longer necessary. There are even penalties for lenders that don’t play well with their leans to make sure access to the program is available for everyone. This bill has a long way to go before being signed into law by the president.

HARP 3.0 had been rumored to eliminate the Fannie and Freddie requirement from the equation but we’ve yet to see it.

You can learn more about refinancing your home without paying unnecessary points or junk fees by checking out my free Underground Mortgage Videos.

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