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Consumer Guide to HARP Refinance Enhancements

Under-water borrowers now eligible for government refinance

Oct. 24, 2011

By SAM GARCIA Mortgage Daily

portrait of Sam Garcia

The government announced enhancements to a refinance program that will enable homeowners whose mortgage balances are higher than their home values to refinance at today's low interest rates. Here's the skinny on what the program revisions mean to consumers.

The Home Affordable Refinance Program was launched in March 2009 as part of the Obama administration's Homeowner Affordability and Stability Plan.

But the program has fallen well short of helping the 4 million to 5 million borrowers originally projected largely because many of the prospective recipients have seen their home values plummet over the past few years.

So the Federal Housing Finance Agency, which oversees $5.7 trillion in U.S. mortgages, announced that equity requirements are being eliminated from the program. The regulator had previously limited the loan balance to 125 percent of a home's appraised value.

However, refinances to borrowers who opt for an adjustable rate are limited 105 percent of the home's value.

The regulator is also allowing the use of automated technologies to value a home instead of a new appraisal report -- which can cost a consumer more than $400.

In addition, some fees are being eliminated on HARP refinances.

The program changes will be implemented by Fannie Mae and Freddie Mac by Nov. 15. The two secondary lenders buy loans from banks and mortgage bankers, package and sell the loans to investors, and guarantee the payments to investors.

Both Fannie and Freddie are controlled by the FHFA, which seized the two firms in 2008.

Consumers won't deal directly with Fannie or Freddie; instead they will deal with loan originators and local banks and lenders. Lenders aren't required to participate in the program, so there are no deadlines in place for when the program might be available at a particular lender.

Homeowners are eligible for the program if their current loan was sold to Fannie or Freddie on or before May 31, 2009.

Consumers can check this online at and or by phone at 800-7FANNIE and 800-FREDDIE.

Acceptable properties include single-family detached and condominiums.

The past six mortgage payments must have been made on-time, and no more than one late payment can have been made during the past 12 months. Borrowers who previously refinanced using HARP are ineligible unless the transaction closed between March 2009 and May 2009.

Eligible borrowers are advised to contact their existing lenders or any other mortgage lender offering HARP refinances.

FHFA cautioned consumers that third-party companies are unnecessary. The agency recommended that borrowers contact their current lenders first.

The FHFA hopes the enhancements will double the nearly 900,000 borrowers who have already refinanced through the program.

It also hopes to move consumers into shorter-term loans.

The regulator outlined a scenario where a borrower who owes $200,000 on a loan with a 6.5 percent interest rate refinances into a 30-year loan and takes a decade to pay the loan balance down to $160,000.

But a 20-year borrower, who would still pay $26 less than the pre-refinance payment, would reach a $160,000 balance in 5.5 years. A 15-year refinance would increase the payment just $190 a month while cutting the balance to $160,000 in only 3.5 years.

HARP runs until Dec. 31, 2013.

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Refinance News
News about refinance programs, pricing and production.
H A R P 2.0 News
News stories about the H o m e Affordable Refinance Program including expanded program guidelines.

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