Refinance Your Mortgage Under the Federal HARP Program

Many Americans are not aware that they can refinance their existing mortgage even if they are “under water” (owe more than their home is worth.) Only 10% of eligible mortgage holders have taken advantage of the program. When the housing bubble burst, Congress passed two laws to help home owners avoid foreclosure. One program termed the Home Affordable Modification Program (HAMP) is specifically designed for owners who are on the verge of foreclosure. It helps to restructure the mortgage so the homeowner can continue to make payments. The second program called Home Affordable Refinance Program (HARP) is designed to help homeowners refinance their mortgages at low rates.

It was designed to help underwater owners to lower their monthly payments. Originally it had a loan to value cap of 125%. That meant that is your home was worth $100,000 and you owed $125,000 on your mortgage, your loan to value ration would be 125%.

In December 2011 the HARP program was modified. The loan to value cap was eliminated, allowing anyone who has an underwater mortgage to refinance. This is now called HARP 2.0.

The HARP program not only lowers your monthly payment, but it also has eliminated Private Mortgage Insurance (PMI) PMI is used when the buyer cannot make the minimum 20% down payment. PMI is a form of guarantee in case the mortgage holder would default on his/her payments. In addition the fee for a home appraisal is waived if the automated valuation method is used.

Previously, you had to go back to your original lender for refinance. Usually they wanted the same PMI coverage. Now you can shop around and use any lender, thus eliminating the PMI payments.

There are some restrictions however. The one that requires much patience is that your mortgage must be held by Fannie Mae or Freddie Mac. At the height of the housing crisis, Fannie and Freddie held 80% of all mortgages. The most common practice was for a lender to resell the mortgage to Freddie or Fannie. What this means in terms of qualifying for the HARP program is that you must make the “connection” between your lender and Freddie or Fannie. Both Freddie and Fannie have databases available for a search of your mortgage. You would need to “match” your lender to the current mortgage being held by Freddie or Fannie. Further your mortgage must have been acquired by Freddie or Fannie prior to May 31, 2009.

Late payments. You must be current in your mortgage payments with no late payments for at lease six months. You can have only one late payment within the past 12 months. In addition you cannot have a prior HARP mortgage refinance. A mortgage refinance under HARP relieves the mortgage lender from being sued for fraud.

There are huge savings in refinance programs. You can use this website for your calculations: www.mortgagecalculator.org The calculator uses 1.25% for taxes and .5% for PMI. If your present rate is 6.75% and you can now refinance at 3%, here are your savings for a $300,000 mortgage:
Monthly payments $1254.81 vs. $2154.13 (6.75%)
Total payments 30 yrs. $455,332.36 vs. $775.485.94 (6.75%)
Interest payments $155,332.36 vs. $400.485.94 (6.75%)

The time is now. The program expires on December 31, 2015 and mortgage rates may not remain this low.

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