Several changes were needed to create refinancing opportunities for these borrowers but at the same time bringing down the risk associated for Fannie Mae and Freddie Mac while bringing some measure of stability to housing markets, according to FHFA Acting director Edward J. Demarco.
The latest statistics indicate approximately 9 million families refinanced into a lower cost or more sustainable mortgage product and among those approximately 10 percent of that number via HARP.
What makes HARP especially unique is that it is the only refinance program that enables borrowers who own more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-to-value (LTV) ratios above 80 percent.
The new program changes addresses other key aspects of HARP including:
- Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers.
- Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac.
- Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac.
- It will eliminate a need for new property appraisal where there is a reliable automated valuation model, (AVM) estimate provided by the Enterprises; and
- Extending the end date for HARP until December 31, 2013 for loans originally sold the enterprises on or before May 31, 2009.
It is important to note than an important element of these changes is the elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-time mortgages. Borrowers owing more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of the low interest rates by shortening the term of the mortgage.
If you are underwater in your current mortgage, contact me for advice on this improved program being made available.