HARP 2.0 – Will that help me?
A lot of people can’t refinance because they owe more than their house is worth or they have a 2nd mortgage or Mortgage Insurance (MI) and we have solutions for many of those issues. There are several programs here now or coming but let’s start with the HARP which stands for Home Affordable Refinance Program.
Everyone is talking about HARP 2.0 and so let’s define it. First of all, since it is 2.0 that means that the program was already around and we are talking about changes so let’s show you what it looks like now and then discuss changes that are sort of in effect now and really in effect after March 19th 2012 when the new changes will be coded into the automated underwriting systems so we can actually approve these loans.
The first thing that you need to know is that this is only for people who have a mortgage already owned by Freddie Mac or Fannie Mae. People tell me all the time that their mortgage is owned by a big bank but if you have a 30 year fixed rate mortgage and it is not interest only, it is probably owned by Freddie or Fannie and I will show you how to find out a little later. Currently you can refinance your home even up to 125% Loan To Value (LTV) and there are different rules and pricing at different levels (95%, 105% etc.). Currently it is a little more difficult if you have a 2nd mortgage or MI. This is what HARP 2.0 is looking to fix.
The first part is easy, they have removed the LTV issue altogether. There will definitely be approvals where we do not need an appraisal but there will also be instances where appraisals will be required but in all instances, any LTV can be approved. Next, it is getting easier to keep a 2nd mortgage or HELOC in place while refinancing the first mortgage and we will be able to accommodate many loans with MI. There is another enhancement that limits the fees on these loans and the qualifying ratios will most likely be relaxed. My suggestion is to look online and see if your loan fits and if it does, gest started with your favorite lender. Start by going to www.FreddieMac.com/mymortgage/ and/or www.FannieMae.com/loanlookup/ to see. Loan applications can be taken in mid February 2012 but may not be able to be fully approved until March 19th if you need the new rules. This program makes sense because they already own these loans and so giving people lower payments makes them more stable so everyone wins.
What if I don’t have a Freddie or Fannie Loan?
On the flip side, you can see why if Fannie or Freddie does not own your loan currently they may not be too excited to take on a new loan of $250,000 on a home that is worth only $200,000 but there may be hope for these people as well. There is talk of using FHA to help these folks even if they do not have a current FHA loan. I think this will probably come true but I do not know how long it will take or what the rules will look like so stay tuned.
One more note is that if you currently have an FHA, USDA or VA loan, you can get a streamline loan without an appraisal and with relaxed qualifying guidelines. We do not use debt ratios at all and we weigh heavily on whether the house payment has been made on time in the last 12 months. This program has been around for the entire 22 years I have been in business so the model is strong.
Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.
Hans Bruhner is a branch manager for First Priority Financial. Hans is licensed by the CA DRE # 01085398 and NMLS #243484 and First priority is licensed by the CA DRE # 00652852 and NMLS #3257. If you have a question, please contact him at (707) 347-9250 or firstname.lastname@example.org