You’ve probably seen these commercials over the past few years from many of the “Big Banks:”
- If you’re a homeowner who’s faithfully made your mortgage payments, you deserve thanks for doing the right thing.
- More than 2.5 million homeowners have taken advantage of a HARP refinance. So can you!
- If you’ve been unable to refinance in the past, new guidelines mean you now may be eligible.
- You may save hundreds of dollars per month!
So what is a HARP refinance? Is it the savior for millions of homeowners struggling with their mortgage payments? Or is it a lot of hype and too good to be true?
Let’s expose the myths and reveal the truth behind HARP.
The Federal Housing Finance Agency created the “Home Affordable Refinance Program” (HARP) in March 2009 to help underwater homeowners refinance their mortgages. This program benefits homeowners who’ve made timely mortgage payments, but could not refinance due to lower home values resulting from the Great Recession. The original plan, which cost the federal government over $100M, was a dismal failure. However, revisions to the plan (often referred to as HARP 2.0) improved the viability and success of the program.
Under HARP 2.0, homeowners may be able to refinance, regardless of whether the property is your primary residence, second home, or investment property. However, in order to be considered for a HARP refinance, your existing mortgage must meet the following criteria:
- Your mortgage must be owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac (FHLMC). Regardless to whom you make your payments, there’s a good chance your mortgage is owned by either Fannie or Freddie.
- Your mortgage must have closed and been acquired by FNMA or FHLMC on or before May 31, 2009.
- You must NOT have received a previous HARP refinance of the mortgage, unless it is a Fannie Mae loan that was refinanced under HARP during March-May 2009.
- Homeowners must be current on their mortgage payments, with no late payments in the last six months and no more than one late payment in the last twelve months.
- The current loan-to-value ratio (LTV) of the property must be greater than 80%.
- The homeowner must benefit from the refinance with either lower monthly payments or movement to a more stable product (such as going from an adjustable-rate to a fixed-rate mortgage).
As part of the 2012 State of the Union Address, President Obama referenced a plan to give “every responsible homeowner the chance to save about $3,000 a year on their mortgage”. This plan is being referred to as HARP 3.0. HARP 3.0 is expected to expand HARP’s eligibility requirements to homeowners with non-Fannie Mae and non-Freddie Mac mortgages, including homeowners with jumbo mortgages and “sub-prime” mortgages. This would be a welcomed improvement, as many homeowners have been shut out of refinancing due to these limitations. However, plans have NOT yet been approved. The Treasury Department has resisted, saying it does not want to see an expansion of the HARP program.
As of now, HARP is scheduled to end on December 31, 2015. And as rates rise, the benefits of a HARP refinance slowly slip away. If you think you might benefit from a HARP refinance, please contact me. I’ll provide all the facts about HARP without all the hype. And I’ll explain whether there’s any benefit for you.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.