How To Refinance When Your Home Is Underwater

Real Estate Agent with CONLON/Christie's International Real Estate


Making Home Affordable logo

The Federal Housing Finance Agency has extended the government's Home Affordable Refinance Program by 12 months.

HARP's new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

  1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
  2. Your home must be a 1- to 4-unit property
  3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
  4. Your first mortgage balance must be 125% or less of your home's market value

If you're not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie's website is; Freddie's is  If you don't locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP's criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either - regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn't matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be "rolled in" to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government's website, but it's for general questions only. For specific Home Affordable Refinance Program information, first make sure you're program-eligible, then pick up the phone to call your loan officer. 

HARP is complex enough that you'll want to talk with a human before taking a proper next step.

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Comments (4)

Jay Lloyd
Cape Coral Florida - Cape Coral, FL
Allpro Home Inspection

Thanks for the clarification. There's a lot more to loan modification than one would think. Have a great weekend.

Best Regards, Jay

Mar 12, 2010 09:35 AM
Michael J. O'Connor
Diamond Ridge Realty - Corona, CA
Eastvale - 951-847-4883

One question that I haven't been able to figure out - is occupancy by the borrower a requirement?  Any guidance is appreciated!

Mar 12, 2010 09:53 AM
Mike Wilbur
Guild Mortgage Company and Oregon Homes For Heroes - Salem, OR

This is a great program to help homeowners.  It can also be used for 2nd homes and non owners as well.

Mar 12, 2010 10:33 AM
Michael J. O'Connor
Diamond Ridge Realty - Corona, CA
Eastvale - 951-847-4883

Mike Wilbur - Thank you for the clarification.  I know of some small time investors who are having trouble and I wasn't sure if this would work for them.  I now can recommend that they look into it.

Mar 20, 2010 03:38 AM

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