HOME AFFORDABLE REFINANCE PROGRAM

Today there is a government-backed stimulus program, called Home Affordable Refinance Program (HARP), part of the Making Home Affordable program that allows those with declining home values qualify for today’s low rates. This is not to be confused with the Home Affordable Modification Program (HAMP) that has recently gotten some negative press (there will be more information on during a future blog over the next few weeks). The need for this program is tremendous. Many home owners are finding out that refinancing at today’s record low rates may be unobtainable. Several years of double digit housing price declines have caused them to become ineligible because they lack equity in their homes. While this would not have necessarily been an issue three to five years ago when clients could qualify for loans that had the best rates with less than 20% equity, today it is impossible. Many of the mortgage insurance companies that would have insured the lender against loss due to low homeowner equity positions are now out of business. Furthermore, the second mortgage lenders who used to provide a subordinate loan to help ease the equity issue for homeowners have been hit with record losses resulting in the products becoming unavailable.
This program will often allow homeowners to refinance their Fannie Mae or Freddie Mac owned homes, even if the home is not owner-occupied. Many home owners’ facing declining values have been unable to qualify due to their home’s depreciating value. As a result, those individuals have been unable to take advantage of today’s record low rates. While there are still restrictions, the first step for home owner’s told they were ineligible to refinance must first research whether Fannie Mae or Freddie Mac government agency currently owns their mortgage. Many unfortunately assume the owner of the mortgage is the same as the servicer, that’s the reason you need to check for yourself!
Some highlights:

• You are not currently paying mortgage insurance (MI/PMI) as part of your existing 1^st mortgage loan payment. If you are in this situation and are lucky enough to be eligible for Freddie Mac’s program, you may be okay.
• If you have an existing second mortgage, your home equity lender will have to agree to subordinate to the new first mortgage terms.
• No additional cash may be received at closing for debt consolidation, home improvement, etc.

While the Making Home Affordable Programs are not going to meet everyone’s needs, they are a start. With no end in sight to the continued price decline in many markets plus the unpredictability of the appraisal process through the Home Valuation Code of Conduct (****The HVCC will be covered in detail in February!), this program is the only coarse of action for many looking to save money on their mortgage. This program is currently scheduled to end by mid-year 2011 so don’t wait. With a divided Congress, there an extension of this program is unlikely.

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