Late last year the administration announced changes to the Home Affordable Refinance Program. These changes were designed to reach a greater number of families that had previously been denied from taking advantage of record low interest rates. Although the government sponsored programs have admittedly impacted fewer families than expected, these changes can help quite a few. More homeowners in states like Florida that suffered significant declines in value can now benefit from the program.
So what did they change? In a nutshell they have removed “loan to value” ratios from the equation. Whereas before your loan could not exceed 125% of the current value of your home, now that ratio is not even calculated. You can owe $300,000 on a $100,000 home and still possibly qualify. Homeowners must be current on their mortgage and have good payment histories to qualify, so this is no bailout. This is the much needed reward for those who have done the right thing and kept their payments current even though their mortgage rates were much higher than current rates.
There are certainly other limitations that will prevent this from benefitting as many homeowners as it should. Your loan must be owned by Fannie Mae or Freddie Mac. Also those who have second mortgages on their homes may find it difficult to qualify because those loans will have “re-subordinate” or stand down to the new refinanced first mortgage. Historically, and illogically, second mortgage lenders have not been accommodating. Also, many of the details to the program are still in flux. Income and credit standards (besides the on-time payment requirements) are supposed to be relaxed, but individual lenders can apply “overlays” (more stringent guidelines) in order to protect themselves from having to buy back loans that go bad. If you feel this program can help you, contact your current servicer or you can call 888-995-HOPE for the HARP hotline.
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