Mortgage Refinance Plan for Underwater Homeowners

The Obama administration has rolled out a plan to revamp the current Home Affordable Refinance Program. HARP, started in April 2009, was created to help borrowers with Fannie Mae and Freddie Mac backed mortgages refinance their loans even if they did not have enough equity in their homes to do so conventionally. The plan was designed to lower borrowers’ interest rates without them having to pay down their mortgage or take out mortgage insurance. Initially, the program was limited to borrowers who owed between 80% and 105% of the value of their homes. But under the new changes, there will be no loan-to-value restriction. Additionally, the new changes minimize the risks banks have in “buying back” mortgages that default and fail to follow conventional Fannie Mae and Freddie Mac underwriting guidelines. Under the new changes, banks will be protected from the “buy back” risk on HARP mortgages and will need only to verify that borrowers meet a largely paired down version of eligibility requirements. The new HARP changes will take effect after Fannie Mae and Freddie Mac issue final pricing information and other technical details around November 15th. What Are the New HARP Requirements? First, the borrower must have paid their mortgage on-time for the last 6 payments and may not have missed more than 1 payment in the last year. Second, the mortgage must have been sold to Fannie Mae or Freddie Mac prior to June 1, 2009. And third, you may not have used the HARP program before as only one HARP refinance per mortgage is allowed. How Do I Proceed? Go online and find out if your mortgage is owned by either Fannie Mae, or Freddie Mac. If your loan is owned by either, contact your lender or any participating HARP lender to discuss your eligibility. If you are HARP-eligible, you must close on your mortgage prior to January 1, 2014.