Access Real Estate LendingHome
Toll Free: 1-877-89-ACCESS
Northern California's Premier Retail Banker
with over $800 million in funded loans
Options for Underwater Home Owners
HARP 2.0, or Home Affordable Refinance Program, has been available to U.S. homeowners as of March 17, 2012. If you’re underwater on your conforming, conventional mortgage, you may be eligible to refinance without paying down principal and without having to pay mortgage insurance. The initial version of HARP was started in April, 2009. The program is also known as the Making Home Affordable plan, the Obama Refi Plan, DU RefiPlus, and Relief Refinance, or Open Access.
In order to be eligible for the HARP refinance program, your loan must be backed by Fannie Mae or Freddie Mac and your current mortgage must have a securitization date prior to June 1, 2009.
Fannie Mae and Freddie Mac have “lookup” forms on their respective websites. Your loan must appear on one of these two sites to be eligible.
Your mortgage may be backed by any big name bank, or a smaller local bank. Regardless as to who you make your monthly payment to, that bank is just your mortgage servicer; the bank that collects your payments. Even the “big four” banks back very few of their own loans. Most loans, for which payments are sent to these banks, are backed by either Fannie Mae or Freddie Mac.
You can use HARP with any participating lender. This is a major change from the original HARP program, as the government is trying to get as many people access to the program as possible. In order to be eligible, you must be current on your mortgage to refinance via HARP. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It’s meant to give homeowners who have lost home equity, a chance to refinance at today’s low mortgage rates. Although, you may use HARP: Even if you’re not “underwater.” Your home loan must be paid on-time for the prior 6 months, and at least 11 of the most recent 12 months. Your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009, and you may not have used the program before — only one HARP refinance per mortgage is allowed. There are no “date exceptions” for HARP. If your loan was not securitized on, or before, May 31, 2009, you cannot use the program. HARP refinances are limited to your area’s conforming loan limits. In most cities, the conforming loan limit is $417,000. However, there are some cities in which conforming loan limits are as high at $625,500. The HARP mortgage program doesn’t allow cash out refinance. Only rate-and-term refinances are allowable, however, costs may be absorbed, into the new loan.
You may refinance an investment or second/vacation property with HARP. Income qualifications have been relaxed, significantly, for the HARP 2.0 Program, so you may not even need to be employed.
EA-III is an automated mortgage approval code. It stands for Expanded Approval (Level III) and means that the loan meets the program’s eligibility standards, but that the file’s combined risk is too high to be approved. Some lenders will accept EA-III findings for a HARP loan. Many more will not.
If you’ve been turned down for HARP but believe that you’re eligible, apply with a different bank and see what happens. Different banks are using different variations of the program. The edits are subtle, but they’re enough to cause some people to get denied who should otherwise have been approved.
All homes, regardless of how far underwater they are, are eligible for the HARP program. However, not all lenders allow this. Not every bank will underwrite HARP loans to the letter of the guidelines. Loans with high LTVs can be risky to a bank. Therefore, some banks will limit their business to loans under 125% loan-to-value (LTV), for example. Remember, just because one bank turned you down doesn’t mean that every bank will. Apply somewhere else to get a second option. Although your home’s value doesn’t matter for the HARP mortgage program, lenders will run what’s called an “automated valuation model, or mechanism” (AVM) on your home. If the value meets reliability standards, no physical appraisal will be required.
If your current loan doesn’t require PMI (private mortgage insurance), your new loan won’t require it, either, regardless as to LTV. If you currently have PMI or LPMI (Lender Paid Mortgage Insurance), your PMI payments will not increase. However, the “transfer” of your mortgage insurance policy may require an extra step. Remind your lender that you’re paying PMI to help the refinance process move more smoothly. With respect to LPMI, different banks have different rules for HARP. There are banks closing HARP loans with lender-paid mortgage insurance attached. That’s a fact! If your bank won’t do loans with LPMI, find one that will.
If you are HARP-eligible, you must close on your mortgage prior to January 1, 2014.
If none of these options are viable for your circumstances, a short-sale may be palatable. In some cases you may short-sale your home, and immediately purchase a new home (in a new area).
Underwater FHA mortgages can be refinanced via the FHA Streamline Refinance program. Underwater VA mortgages can be refinanced via the VA IRRRL mortgage program (VA Streamline Refinance).
Call us today for more information at 530.897.4090
Leave a Reply
You must be logged in to post a comment.