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The Making Homes Affordable Program, announced in March 2009, offers strong options for homeowners seeking alternatives to foreclosure and is part of the Obama Administration’s broad, comprehensive strategy to get the economy and housing market back on track.
There are many individual programs that make up the larger Making Homes Affordable initiative. The Making Home Affordable Refinance Program (HARP) was designed to help up to 5 million home owners refinance their loans that are currently “upside down” meaning they owe more on the loan than the home can be sold in today’s market. The Federal Home Financing Agency announced Monday that its Home Affordable Refinance Program (HARP), which was originally set to expire on June 30, 2010, will be extended to June 30, 2011.
Your mortgage must be currently serviced by Fannie Mae or Freddie Mac in order to qualify for the program. The Fannie Mae version of the Making Home Affordable Refinance Program is called Fannie Mae DU Refi Plus and the Freddie Mac version is called Freddie Mac Open Access.
The Home Affordable Refinance initiative, is designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae or Freddie Mac mortgage loan, but due to a decline in property values have been unable to refinance.
The expectation is that refinancing a Fannie Mae or Freddie Mac loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product such as a 20 or 30 year fixed rate loan.
HARP FAQ’s
I'm current on my mortgage. Will a refinance under the Home Affordable Refinance Program (HARP) help me?
Eligible homeowners who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.
How do I know if I am eligible for a refinance under HARP?
You may be eligible if:
- You are the owner-occupant of a one- to four-unit home.
- The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac
- At the time you apply, you are current on your mortgage payments ("Current" generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months; or, if you have had the loan for less than 12 months, you have never missed a payment).
- The amount you owe on your first lien mortgage does not exceed 125% of the current market value of your property.
- You have a reasonable ability to pay the new mortgage payments.
- The refinance improves the long term affordability or stability of your loan
Is HARP a loan modification program?
No. Loan modifications normally reduce payments by lowering interest rates or extending the loan period. If you owe significantly more on your first mortgage than your home is worth or are on the verge of foreclosing your best bet is to seek a loan modification from your current lender.
Refinances under the HARP initiative reduce a homeowner’s monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product such as a 20 or 30 year fixed rate loan.
Will refinancing lower my payments? How might HARP benefit me?
The objective of a refinance under HARP is to provide creditworthy homeowners who have shown a commitment to paying their mortgage the opportunity to get into a new mortgage with better terms.
Homeowners whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Homeowners who are paying interest only, who have a low introductory rate that will increase in the future, or who face a balloon payment may not see their current payment go down if they refinance to a fixed rate and payment. These homeowners, however, could save a great deal of money by reducing the amount of interest you pay over the life of the loan.
Refinancing into a more stable fixed-rate loan product and avoiding future mortgage payment increases would likely improve your ability to sustain your mortgage payments over the long-term. When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
Will a refinance under HARP reduce the amount that I owe on my loan?
No. The objective of a refinance under HARP is to help homeowners get into more stable or more affordable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe.
How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?
When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?
Ask your mortgage lender or servicer. Also, both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available. Homeowners can enter information to determine if either agency owns or guaranteed the loan. This information is not a guarantee of eligibility for a refinance under HARP, as other qualifying criteria must also be met.
For Fannie Mae:
1-800-7FANNIE (8am to 8pm EST)
www.FannieMae.com/loanlookup
For Freddie Mac:
1-800-FREDDIE (8am to 8pm EST)
www.FreddieMac.com/mymortgage
I owe more than my property is worth. Do I still qualify for a refinance under HARP?
Eligible loans will include those where the first lien mortgage does not exceed 125% of the current market value of the property. For example, if your property is worth $200,000 but you owe $250,000 or less on your first lien mortgage you may qualify. The current market value of your property will be determined after you apply to refinance.
I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?
As long as the amount due on the first lien mortgage is less than 125% of the value of the property, homeowners with more than one mortgage may be eligible for a refinance under HARP. Your eligibility will depend, in part, on two additional requirements:
- The lender that has your junior lien mortgage must agree to remain in a junior lien position.
- You must be able to demonstrate your ability to meet the new payment terms on the first lien mortgage.
What are the interest rate and other terms of a refinance under HARP?
The rate will be based on market rates in effect at the time of the refinance and the homeowner will be subject to any associated points and fees quoted by your lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.
Can I get cash out of a HARP refinance to pay other debts?
No. The Home Affordable Refinance will not return cash to the borrower for the purpose of paying other debts.
How do I apply for a refinance under HARP?
Call your mortgage lender, or any lender approved to do business with Fannie Mae or Freddie Mac, and ask for a Home Affordable Refinance application. The number is on your monthly mortgage bill or coupon book. Please be patient yet persistent. Your lender could be handling a large volume of inquiries about the program and it may take some time before they are ready to process your application. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call. It will help your lender if you gather some information and documents before you call. Generally, you will need the following:
- Information about the monthly gross (before tax) income of all the homeowners on your loan, including recent pay stubs if you receive them, or documentation of income you receive from other sources
- Your most recent income tax return
- Information about any junior lien mortgage on the house
- Account balances and minimum monthly payments due on all of your credit cards
- Account balances and monthly payments on all your other debts such as student loans and car loans
I am delinquent on my mortgage. Will I qualify for a refinance under HARP?
No. Homeowners who are currently delinquent or have been more than 30 days overdue during the past 12 months generally will not qualify. Contact your servicer to see if a modification under the Home Affordable Modification Program is an option for you.
Will I need mortgage insurance on a HARP refinance?
If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for a refinance under HARP. If your existing loan does not have private mortgage insurance, it will not be required as part of a refinance under HARP.
How long will refinances under HARP be available?
The program expires on June 10, 2011. Your refinance under HARP must have a mortgage note date on or before that date.
What is an SFR?
The complex details involved with short sales and foreclosures are unique calls for specialized expertise. Contact an agent such as myself that has earned the Short Sale and Foreclosure Resource (SFR) Certification through the National Association of Realtors and who is committed to guiding you through the process, setting realistic expectations, and helping you make the right decision to avoid foreclosure.
If you are in a situation where your home is “underwater” due to falling home prices, you are unable to make your current mortgage payments and you are considering pursuing options such as a short sale, deed in lieu of foreclosure, strategic default or even foreclosure, there could be drawbacks that I, as a real estate agent, cannot advise you on. For your protection, I suggest that all homeowners:
- Obtain legal advice from a competent real estate lawyer regarding deficiency judgments
- Call an accountant or CPA to discuss short sale and foreclosure tax ramifications
Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale or foreclosure will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.
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