After months of work, HARP 2.0 is available to Fannie Mae and Freddie Mac consumers who want to refinance a home loan but have borrowed more than their properties are currently worth.
HARP 2.0 HARP indicates that the Home Affordable Refinance Program is being reserved as an improvement over the three-year edition that almost everyone acknowledges didn’t help anyone.
The reason for that breakdown: The original program had caps on the loan-to-value ratio, the amount of a bank loan as a proportion of a property’s assessed dollar value. If the balance of a mortgage loan exceeded the appraised value, for example, $300,000 vs. $150,000, the buyer could not refinance.
Recognizing that none of the buyers the program was meant to help would be able to qualify, the caps were removed when the new version of HARP was proclaimed in October.
Does that mean that all financial institutions have not accepted limits?
“I have lenders that have capped loan-to-value. Some have even differentiated between attached and detached homes,” said Fred Glick, a Philadelphia mortgage broker who has started a blog to update consumers. “They’re still limiting what they’ll do” with a 150 percent loan-to-value ratio and no more.
“All in all, it’s a great way to get people’s rates down despite low values,” Glick said. “This will decrease the supply of homes for sale and increase long-term values.”
As with each of these schemes, the good amount of time since HARP 2.0 was announced has definitely been spent trying to get loan providers on board, which is no easy feat as Fannie and Freddie loans they are grouped as mortgage-backed securities that are owned by many investors. All investors must agree before borrowers can apply to lower monthly payments at today’s low fixed interest rates, which have been below 4 percent for many months but are now beginning to rise as they rise. bond yields in an apparently improving economy.
As of March 17, HARP 2.0 was implemented to help keep homeowners afloat. About four million Fannie Mae and Freddie Mac borrowers across the country owe more on their mortgages than their homes are worth.
The federal government has a website, http://www.makinghomeaffordable.gov, (link) that has details about HARP 2.0 and additional information.
Subsea extensions may also qualify for remortgage under the provisions of the current National Mortgage Settlement. That refers to loans not owned by Freddie or Fannie or covered by the Federal Housing Administration, which has its own streamlined refinancing plan under a program announced in January. Details of that deal are being worked out, and qualified lenders will be informed by the five participating financial institutions Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial and Citibank at some point.
To be eligible for HARP, homeowners must be current on their mortgage. That is, paid in full up to date, with no overdue settlements in the last six months and only one in the last 12. They also have to demonstrate that they can pay the new settlements acquired with the refinancing without any difficulty.
Borrowers must have closed on their current mortgage on or before May 31, 2009, and cannot have refinanced through HARP before. In addition, real estate loans must be within existing “conforming loan limits,” which differ by location.
One thing both Fannie and Freddie want to see is whether buyers refinance loans with terms shorter than 30 years. They call this a “move toward a more stable product.”
Customers with a single interest loan will be encouraged to refinance to a home loan product that provides principal repayment and principal collection on the home.
People who have an adjustable-rate mortgage will be guaranteed to refinance to a fixed-rate loan that eliminates the potential for a payment shock, or to an adjustable one with an initial fixed term of five years or more and equal to or greater than the existing mortgage.
Homeowners with a 30-year fixed-rate mortgage will be warned to remortgage at a 15-, 20-, or 25-year fixed-rate that makes available, in Fannie Mae’s words, accelerated principal amortization and the creation of capital. But debtors will not be allowed to pay off principal under this refinance “other than closing fees and particular allowances to cover items such as association fees, property tax bills, insurance costs, and rounding adjustments.”
In addition, consumers cannot reward subordinated financing in the form of a home equity line of credit or a closed second mortgage with the refinance mortgage proceeds.
Global mortgages and convertible adjustable rate real estate loans are eligible for HARP 2.0 if the borrower exercised the contingent right to remortgage the balloon or convert the ARM and “redelivered” it to Fannie Mae before June 1, 2009.
