Homeowners who are upside-down in their mortgages may now have a chance to refinance under a newly announced program.
Dubbed HARP 2.0, the refinance program is an expansion of HARP – Home Affordable Refinance Program – that was unveiled in 2009, according to Dan Green, a loan officer with Waterstone Mortgage in Cincinnati and the author of the nationally recognized mortgage blog, TheMortgageReports.com.
In order to be eligible for the HARP refinance program, homeowners must meet three pre-qualifications: home loan must be paid on-time for the prior six months and at least 11 of the most recent 12 months; mortgage must have been sold to Freddie Mac or Fannie Mae before June 1, 2009; and the homeowner may not have used the HARP program before (only one HARP refinance is allowed per mortgage).
Local mortgage expert Shawn Kaplan of Access National Mortgage explained how this new program could help homeowners whose requests to refinance were previously denied.
“If they feel like they’re under water or have called a lender in the last year or two and have been told, ‘Sorry, I can’t do anything because you owe more than the house is worth,’ they need to check again,” he said.
“They could possibly qualify and save $100 to $200 a month without any out-of-pocket expense. In most cases, they get to skip a whole month’s mortgage payment and refund all of their current escrows (taxes and insurance).”
Kaplan explained how the original program was intended to help some 9 million homeowners, but ended up helping less than 100,000 homeowners because of an appraisal cap.
“The defining characteristic of the newly expanded HARP program is the allowance of an unlimited loan-to-value ratio,” Green expanded. “No matter how underwater you are, you can still apply.”
Kaplan added, “If you qualify, you’re going to win.”
He stressed the importance of getting paperwork in order now.
“A lot of people are going to find out about this … you need to get on it before it clogs up the pipeline,” he said, adding that the loan can be closed in two to three weeks.
Kaplan also stressed the effect such a program could have on the economy.
“How many households could use an extra couple hundred dollars in their budget, which in turn is going to be get put back in the economy?” he asked.
Some have speculated that such a program for mortgage rates may be a mistake and likened it to lax loans available before to the burst of the housing bubble.
“Yes, it is very similar to what we did before; however, there is a major difference. This is only (available) to people who have not missed a mortgage payment,” Kaplan says. “If they can make a mortgage payment at $900, they can make it at $700.”
He described these homeowners as “people who have exhibited an ability to repay their mortgage loans.”
Additionally, they’re not being approved for more than the loan amount.
“They’re not allowing people to go out and borrow more, all they’re doing is lowering the rate on their mortgage loan,” he said.
For additional information, contact your local lender or to view a list of Q&As, visit www.themortgagereports.com.