The Obama Administration, by way of the Federal Housing Finance Agency (FHFA), announced a major upgrade to the Making Homes Affordable Refinance Program (HARP). This program is designed to help homeowners who owe more on their mortgage than the home is worth, so-called “underwater” mortgages. Homeowners of underwater homes cannot refinance their loans because lenders will not write a loan that is under-collateralized, meaning, they can’t sell the home to recover the amount of the loan because the house is not worth the amount of the new loan. Therefore, untold thousands of homeowners cannot take advantage of today’s historically low interest rates to refinance their existing mortgages.
The HARP was designed to assist underwater homeowners by providing a government subsidy and incentive to lenders to persuade lenders to make loans. The HARP provides incentives directly to the banks to motivate them make loans. The FHFA claims that it has helped 900,000 underwater homeowners refinance their loans.
The new HARP rules are designed to increase the number of loans by waiving some fees and penalties to make the cost lower for homeowners and waiving some requirements for appraisals. The changes are designed to lower costs for banks and homeowners. The HARP program has been extended to December 2013 for eligible loans.
The eligibility requirements for HARP are:
- The existing mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Homeowners can determine if they have a Fannie Mae loan by clicking here or calling 800-7FANNIE from 8 AM to 8 pm ET. For Freddie Mac loans click here or call 800-FREDDIE from 8 am to 8 pm ET.
- The program will continue to be available for loans with Loan to Value Ratios above 80 percent.
- Borrowers must be current on their mortgage payments with no late payment in the past six months and no more than one late payment in the past 12 months.
- Borrowers should contact their existing lender or any other mortgage lender offering HARP refinances.
The loan to value ratio continues to be a major hurdle for most Nevada homeowners that disqualify them from HARP. The 80% LTV means that a house cannot have lost 20% (or more) of its value. As most homes in Nevada have lost astronomical levels of value, some over 50%, HARP remains a program that may help Nevadan’s out of state friends and relatives but will not be of much help locally.