Today, the Obama Administration, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac have announced a number of changes to “HARP”, the 2 year old Governmental refinance program that may open the door to refinancing for a million or more US homeowners. The Home Affordable Refinance Program is also known as “Making Home Affordable plan”, and/or the “Obama Refi plan”. The program allows certain underwater borrowers who might not otherwise be able to take advantage of extremely low current mortgage rates to refinance their existing mortgages. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It’s meant to give homeowners who are current on their mortgages, and who have lost home equity, a chance to refinance at today’s low mortgage rates.

Is the new government refinance program music to our ears, or another missed mortgage blunder?

The program was originally aimed at those with LTVs between 80-105%, and was later expanded to LTVs up to 125% (although many lenders initially only participated up to 105%).  According to the Wall Street Journal, 900,000 people have refinanced through HARP since the program started, and only 72,000 of these borrowers had LTVs between 105-125%.

Some of the important components of the program include:

  • Extension of the original loan program through December 31, 2013
  • HARP refinance can be with any participating mortgage lender so you need not go back to the current or original lender
  • Eligible loans must have been purchased by Fannie Mae or Freddie Mac before June 1, 2009
  • New Mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash
  • Removal of the current 125% Loan to Value loan cap on all homes — regardless of current equity or loan to value.
  • Lower fees if refinanced into shorter term loan, or new favorable loan terms
  • No minimum credit score requirement with the HARP refinance program
  • Homeowners must be current on loan for previous six months, and at least 11 of the most recent 12 months
  • Only one HARP refinance per mortgage is allowed. (Cannot have used the HARP program before)
  • New appraisal may not be needed
  • If your current loan doesn’t require private Mortgage Insurance, the new loan won’t require it either.
  • Second/vacation homes or current Investment/rental property permitted, even if the home was once the primary residence.
  • New loan must close on your mortgage prior to January 1, 2014
  • Program expected to be rolled out by November 15, 2011 however we are taking loan applications immediately.

Some important factors that might make the loan Ineligible:

  • FHA, VA, USDA or Jumbo mortgages, are not HARP-eligible.
  • If the loan is past-due on your current mortgage payments.
  • The program doesn’t allow cash out refinancing. Only rate-and-term refinances are allowable.
  • Income verification is required for the HARP refinance program.
  • All subordinate/junior liens must be re-subordinated to the new first mortgage
  • Current loans/mortgages cannot have a loan-to-value ratio less than 80%


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