HARP Refinancing Explained

Have you been faithfully making all your mortgage payments yet watched your equity wither away?

Have you been feeling like the Federal assistance programs have nothing to offer you?

Well, think again! The HARP Refinance Program may just fill the bill for a lot of homeowners who are current, but find themselves boxed in on all sides. They are current on all their payments and may be struggling to pay the mortgage, yet they are unable to refinance into a lower cost loan because their property values have fallen. Sounds like you? Well, read on.

The HARP (Home Affordable Refinance Program) is a Federal government program that is designed to help homeowners refinance their current mortgages into a more stable fixed-rate loan product. The mortgage must be owned by FNMA or FHLMC (Freddie Mac). It is important to understand that HARP IS NOT a plan that gives you principal reduction. In other words, you will still owe the same amount of money on the property. You will just be getting a more stable loan with a lower interest rate and more affordable payments.

This is a very new program and most lenders and mortgage brokers won’t be actually doing any HARP refinances until March 2012. But it may be advantageous to get your application in early, so apply now! Don’t be discouraged if your lender doesn’t have any information yet. For more information, visit www.makinghomeaffordable.gov or call 888-995-HOPE (4673).

Or contact me via phone (909-972-1616) or email (docrealtor45@gmail.com). I’d be delighted to put you in contact with mortgage brokers I know who will be doing HARP refinances.

HARP is a limited-time program and will end on December 31, 2013.

Below are the most frequently asked questions about HARP. If you have any further questions, please feel free to ask.

How would I know if my mortgage is owned by FNMA or FHLMC?
If you are not sure if FNMA or FHLMC owns your loan, here is a place to start:

Check if FNMA owns your loan:
Phone: 1-800-7FANNIE

Check if Freddie Mac owns your loan:
Phone: 1-800-FREDDIE

What are the eligibility criteria to qualify for HARP?
~ You must be current on your mortgage. You cannot qualify if you are in default.
~ The property must be a residential property that is 1 to 4- family, so a single-family home, duplex, triplex, and 4-plex would all qualify.
~ The mortgage must be owned or guaranteed by FNMA (Fannie Mae) or FHLMC (Freddie Mac). The mortgage must have been sold to FNMA or FHLMC on or before May 31, 2009.
~ The mortgage cannot have been already refinanced under HARP previously.
~ The loan which is being refinanced cannot have any prepayment penalties or balloon payments.
~ The loan which is being refinanced cannot exceed the conforming loan limits of the area where the property is located. (See the next question to find conforming loan limits of your area.)

Please understand that eligibility doesn’t mean that you are automatically approved. You have to go through the application process and have the loan go through underwriting, just like every loan and every refinance does. The homeowner has to qualify with respect to income and other debts and credit score, and the property has to qualify as well, with respect to value and condition.

How can I find if my loan is within the confirming loan limits of the area where my property is located?
In most counties in the U.S., that limit is $417,000 for a SFR (single family residence). It’s higher ($625,500) for very high cost areas. To check out your county, go to: http://themortgagereports.com/loan-limits Choose “conforming loan limits” from the drop-down menu.

I am current on my mortgage payments but I had some late payments in the past year. Would I qualify?
You cannot have any late payments at all in the previous 6 months, and you cannot have more than 1 late payment in the past 12 months.

Can I qualify if my house has no equity?
Yes! The property may or may not have equity.
(Equity = Fair market value – Mortgage Balance).

Would my investment property qualify for HARP?
Yes! You can use the program for your primary residence, a residential investment property, or a second or vacation home. HARP is not designed for any commercial properties.

Would I qualify if I have junior liens?
Yes, you can. However, the junior lien holders (2nd, 3rd mortgage or HELOC, etc.) must agree to remain in a junior lien position.

Do all lenders participate in HARP?
No. Lenders are not required to participate in this program. You will have to ask your lender if they participate in HARP.

My lender doesn’t participate in HARP. What should I do?
You can choose any participating bank to refinance under HARP. You don’t have to work with your current lender.

Are there any fees involved?
As with all refinances, there are fees and closing costs involved that will vary from lender to lender. In order to incentivize homeowners to pay off their house debt sooner, there will be much lower closing costs and lower interest rates if you refinance into a 15- or a 20-year loan instead of a 30-year loan.

What would my new interest rate be under a HARP refinance?
The interest rate will be based on the market rates at the time of the refinance, and will vary from lender to lender and over time. It’s a good idea to make a spread sheet and keep track of different programs and rates and costs offered by different lenders, so that you can choose the best program for you with the lowest costs.

What is LTV and how does it affect HARP? Are there any limits?
LTV means “Loan to Value.” If your house is worth $300,000 and you have a mortgage that is $150,000, then you have 50% LTV. Loan/FMV x 100= LTV.

If you refinance into a fixed-rate loan with a lower interest rate and lower payment, there are now no longer any limits on LTV.

If you are refinancing into an adjustable rate mortgage, you cannot exceed 105% LTV. For instance, if your house is worth $100,000, the maximum loan amount is $105,000 if you are refinancing into an adjustable rate mortgage. It is important to keep in mind that even though the HARP guidelines have no LTV, many banks will have their own guidelines that may differ from HARP.

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25 Responses to HARP Refinancing Explained

  1. Super article, We are checking back again on a regular to watch out for updates.

    • PMI is in place to protect the bank from the foreclosure process. Essentially your paying the bank upfront for the costs associated with foreclosure. By some calculation they figure you more likely wont go into foreclosure after 80% of your loan is paid. Either that or you have already paid enough. You could get PMI dropped by getting an up to date appraisal done on your home. If your home has appreciated in value (not likely) beyond the 20% of your loan you could negotiate getting the PMI dropped. Either that or put more money down on your loan.

    • You can’t get PMI waived. The only way not to have PMI added to your Mortgage is to put 20% down on the home. You can also get PMI reevmod once you pay down the principal of the mortgage to a point where there is 20% equity.

  2. It can be difficult to find practiced people with this topic, you can be understood as you know exactly what you are writing on! Thank you

  3. Im thankful for the blog post.Really thank you! Really Great.

  4. Im obliged for the blog.Really thank you! Great.

    • If your lucky enough to find soonmee to give you a mortgage. It is not easy to get a loan to buy a home unless your credit is good and you have no debts. So if you are looking to buy a home with outstanding debts I doubt you will be able to buy a home. You can try but you will probably be told to pay off your debts first. Your debt ratio has to be in line with your income to be eligible.Good Luck.

  5. Makenna Plumley

    Looking forward to reading more. Great article.Really looking forward to read more. Fantastic.

    • It may, but not directly. Purchasing a home will make you more attractive to lenders because they know they can take your home if you don’t pay them back so they may be more willing to lend to you. Paying your bills on time and keeping decent balances on your credit cards would be a better first step, though.

  6. Natalie Muldoon

    Really informative blog article.Really looking forward to read more. Really Great.

    • I agree with your other answer-person. You need to sell the original home. If you have trouble making the payments on your old home until it is sold, you can go through mortgage modification, through which your payments will be lower, and you’ll be paying more on the amount owed.

    • This is what I do. There are a couple mitponcecsions on other answers that I’d like to correct.This loan is for people aged 62 and over. It allows them to draw on some of the equity in their homes without having to make a mortgage payment for as long as they live in the house. When they permanently leave the home or sell it, the mortgage is due. Until that time, they pay their homeowner’s insurance and real estate taxes but nothing to the lender. Credit and income, and naturally health, have no bearing on this loan. Those things will not determine eligibility or the rate of interest. The qualifications are that all owners are over the age of 62, there’s enough equity, generally 50% but the older you are the less equity is required, and that the house is an allowable type. We can do it on 1 to 4 family homes, most condos, manufactured houses as long as they meet all the FHA requirements. We can’t do it on mobile homes, and probably never will because they are personal property not real property. Right now we can’t do co-ops, but the Housing Bill of 2008 will probably change that as well as the maximum value the FHA allows on the Home Equity Conversion Mortgage. That’s the one most people will get. There may be some other changes from the new law. It was signed a couple weeks ago and HUD is determining the implementation now. Although I talk to people every day who tell me what the changes will be, the banks don’t know yet and won’t until HUD tells us.You do not sell your house to the lender. This is a mortgage. In England they have a Reverse Mortgage Scheme (they use the word scheme very differently outside the US not with the negative connotation we give it) in which the lender does buy the home and the person lives there for as long as they want. But in the US, it’s just a different type of mortgage. The loan amount will be based on the age of the youngest owner and the value of the home, as well as a couple other factors that are too involved to try to explain here. Someone who is 62 will get considerably less than someone who is 92.You cannot lose your home to foreclosure, because there are no payments to make as long as you live there. The mortgage will be called in the case of the death of the last borrower, non-payment of taxes or home owner’s insurance, or if you let the place deteriorate, although we don’t have any mortgage police checking up on you. These are the same circumstances that any type of mortgage would be called. When the home is sold by the borrowers, the mortgage is paid at closing. If the circumstances are such that the loan amount exceeds the market value of the home, the bank absorbs the lost. This is called a non-recourse loan. We’ll take the market value price of the home, but you can’t sell a $100,000 house to Cousin Joe for $40,000. On any other mortgage we would foreclose, and you would still owe the rest of the money. The heirs have the same options they would have on a home with any type of mortgage pay with existing funds, refinance into their own names with adequate income and credit, or sell the home and pay from proceeds. Excess proceeds are theirs, but they don’t make up the difference if there’s a shortfall of proceeds.You cannot outlive the mortgage. There are various ways to access your funds. 1) You can get a lump sum. 2) You can get a monthly check for a set amount of time. 3) You can get a monthly check for as long as you live in the house, no matter how long that is. Even if you were there long enough to use up every penny of your equity, we’d still send a check every month while you live there. 4) You can have a credit line. 5) You can combine these ways too. You get a chunk of money to buy a new car, then put the rest in the credit line. Any combination is possible based on what makes sense for you. The term of this loan is as long as one of the borrowers remains in the house.Some lenders allow people who are not 62 to be on the warranty deed but not be borrowers. In some states they can be on the warranty deed only if over 60. But if there’s one borrower and two owners, if that borrower dies or permanently leaves the home, the mortgage is due.Sorry this is so long, but it’s not a cut and paste.

      • Expert Realtor I can tell you now, unless you pay for refinancing you won’t get them to lower it any lower than it is now. Millions of people have job situations and overextend themselves. One of you can take out a second job for awhile to lower your debt. Banks make money by refinancing they are not going to do it for free and I really wished the news would stop mis-informing the public as if it’s as simple as making a phone call.It’s very, very rare.October 15, 2011 | 1:31 pm

  7. Thanks so much for the article post. Will read on…

    • If you’ve already got bad credit, you may not be able to purchase a home except at a high interest rate. If your score is REALLY low, you probably won’t be able to get a loan at all.However, if you do get a loan and make all of your payments ON TIME, yes, it can help your cridet score.A mortgage lender is going to look at your score before they approve a loan though so you have to have a high enough score in the first place.If you want to improve your score, the two things you can do that will help the most are paying bills ON TIME, and paying off debt. That means all your cridet cards need to be under 30% of the total cridet limit you have on them. Don’t charge more stuff. Pay them off. Make more than the minimum payment due on cridet cards. Always making the minimum payment never really gets you anywhere. You’ll be in debt for the rest of your life making minimum payments.

      • donfletcheryh If you could offer to pay down the principle by say 20% YOU MIGHT HAVE LEVERAGE TO NEGOTIATE.I do not see any leeagvre you have to negotiate with. Your strained financial situation would just worsen your bargaining position as it worsens your credit rating.The only leeagvre you appear to have is a threat to stop paying and go into foreclosure, which might hurt you more than it hurts the bank. So negotiation room is cramped. October 15, 2011 | 11:58 am

      • Going to put this aritlce to good use now.

  8. good.

  9. you’ll have to have decent credit to get a mortgage for the home to begin with. but once you’ve been paying your mortgage on time for awhile, it may help improve your crdeit. the best thing you can do is get a copy of your crdeit report and pay off your old debts, then keep up with all of your bills by paying them on time.

    • Are you sure they have a reverse mortgage? A reverse is taking the equity OUT to pay the bills ?? What did they do or are they doing with the reverse proceeds (line of credit or monthly allocations??).If they took the lump sum 4 years ago and blew thru that, you do have to be concerned (with many areas appraisal’s lowering..) if there is any equity to refinance against. Find a good mortgage professional to talk to. Ask around for referrals.

  10. The short sale, by itself, will not afefct your credit. But you will have to pay off the old mortgage when you sell. If you can’t do that, then you’re in big trouble.You can always buy another house if you pay cash. The problem is getting anybody to lend you any money.As for The bank will not just let you walk away how are they going to stop you? It’s not a crime to own money. But when you are behind in payments, they might get a court judgment and take any money, cars, furniture, etc. that you have. Any if you get any money later, they can come back and take that except for about $200 a week to live on (depends on the state).

  11. thanks for a great post and interesting comments. i found this post while surfing the web. thanks for sharing this article.

    • I agree with first response, but I have to be concerned about elderly people who find themselves in a credit problem, when they already have a reverse mortgage. The problem is 4 years of reverse payments. if they did payment. only , or were they receiving monthly payments. Any and all monies paid to them will be added to their bal. Reverse mtgs. have different pay structures, and they may not have enough equity to Re-Fi. If you are going to advise them, first look at the type of mortgage, and the accelerated clause, or the pre-payment option disclosure. Also H.U.D. has a website dedicated to this subject. Hope this helps,Good Luck!

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