OK, everyone is talking about HARP 2.0 and so let's define it.     um.... no!

  cute, but still no.  Nice but a different kind of HARP. 

It is an acronym and it stands for Home Affordable Refinance Program

First of all, since it is 2.0 that means that the program was already around and what everyone is buzzing about is the new changes. So let's show you what it looks like now and then discuss changes that are sort of in effect December 2011 but really in effect in March 2012.

Currently the program allows you to refinance a mortgage if you owe more than the home is currently worth and it allows you up to 125% Loan To Value (LTV). There are different rules up to 95%, up to 105% and up to the 125% cap. The loan has to have been funded prior to June 1st, 2009 and must be currently owned by Freddie Mac or Fannie Mae and you still need to qualify to make the payments and have decent credit.

The rules on the new program are written but lenders interpretations are not quite in stone yet. Fannie and Freddie will not have their updates to the automated underwriting systems updated until March 2012 and most lenders are waiting for that to start funding these loans. It is complicated but basically if we lenders have an automated approval from Freddie or Fannie and they are buying the loans, we are in a better position.

What is changing is the LTV limit is being tossed out and you can finance no matter how far under water you are. They are also loosening credit and qualifying guidelines and will be putting more emphasis on payment history and less on debt ratios and perfect credit. This is the part that is most unclear until we get the automated underwriting updates. We have heard that guidelines will be looser but there are no definitions and that is what is being built into the system.

Lastly, there will be caps on fees charged on these loans. Currently if you have a higher LTV or lower credit score there will be an extra fee charged. Some of these are being removed and for the ones that are staying, there will be a maximum and that is good for a lot of people and really good for investment properties.

So...... what should you do?

What you should do is contact your favorite lender (I can help in CA) and have them get you started in their system so when the underwriting guidelines are updated they can just plug you in when things get started in March. You may just qualify now but if not, at least you will be first in line.

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