The Federal Housing Finance Agency (FHFA) has announced changes to the Home Affordable Refinance Program (HARP). The FHFA hopes that the new program, which eases eligibility rules, will double the number of homeowners currently able to lower their mortgage payments.
How does new program, extended through 2013, differ from the Home Affordable Refinance Program (HARP) established in 2009?
1. Eligibility for HARP was limited to homeowners who were no more than 25% underwater. Under the new guidelines, this 25% limit has been abolished. Being underwater on your loan will no longer effect your eligibility.
2. Many homeowners could not afford to pay the closing costs and appraisal fees associated with refinancing under HARP. These fees could run into thousands of dollars and, and for those already struggling to pay their mortgages, were simply beyond their means. Under the new plan, some refinancing fees will be eliminated. If there is a reliable automated valuation model (AVM) from Fannie Mae or Freddie Mac, the property appraisal requirement will be waived.
3. Under HARP, lenders charged fees based on risk when converting from long-term to shorter term home loans. These fees have been eliminated; hopefully lenders will have more freedom to refinance loans.
One caveat: Unfortunately, this is still a completely voluntary program for lenders. They are not required to refinance any loans.
Who will be eligible for the new program?
1. Homeowners with loans, sold to Freddie Mac or Fannie Mae, before June 2009.
2. Homeowners who are up to date on their mortgage. Any late payments within the last year will disqualify you.
The government hopes to qualify 1 million or more homeowners who are underwater on their loans. Unfortunately, this is barely 10% of those estimated to be in that position. For those who are eligible, and do manage to refinance, the savings could be considerable. Homeowners in Arizona, California, Nevada, and Florida, who find themselves underwater by as much as 50%, and whose loans are in good standing, could benefit the most.
Full details on the new plan will be released my Freddie Mac and Fannie Mae on November 15. Homeowners might be able to apply as early as December 1.
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