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Seven years after the federal government first offered an option to help some homeowners refinance into more affordable mortgages, the program is being extended yet again, and plans for a new refinancing program are being completed.
The Home Affordable Refinance Program (HARP), has already been extended twice and was scheduled to end at the end of this year, 2016. But good news - HARP is set to continue , according to the Federal Housing Finance Agency (FHFA). This is the agency that also oversees all Fannie Mae and Freddie Mac loans.
Why Was HARP Created?
HARP began as an aftermath response to the housing crisis. HARP allows people who owe more than their home is worth, or who have little equity, to refinance into a loan at current low interest rates. Most recently, the average rate for a 30-year, fixed-rate mortgage has hovered below 3.5 percent. Contrast that to 2008, when it stayed at around 6 percent.
More than 3.4 million homeowners have refinanced their mortgages under the HARP program since it began. Approximately 18,000 borrowers refinanced under HARP in the second quarter of 2016.
More than 323,000 loans are estimated to remain eligible for refinancing under HARP. Major real estate firms estimate that about 12 percent of mortgaged homes remained underwater at the end of June of this year.
Many borrowers may still not be aware that the HARP program exists. Or, they may have failed to qualify in the program’s early years because of missed or late payments. As a result, some may think they are ineligible.
Why HARP is Important!
In addition to that, some borrowers remain wary, perhaps because of past problems with lenders. Some borrowers may be suspicious that HARP is “too good to be true,” or they may simply not want to take the time to apply.
But homeowners really need to take the time to talk to banks and see if they qualify. A HARP refinancing loan can save them thousands over time, and keep them from losing their home if they are upside down in payments and their home ownership is in jeopardy.
HARP offers a streamlined application process that most often does not require an appraisal. It’s really in the interest of homeowners to check it out.
A teacher in Ohio reports that a while shopping at a grocery store, a bank teller told her about HARP and encouraged her to apply. She was approved for HARP refinancing and has now lowered her mortgage by $300 each month, greatly reducing her financial worries. Before HARP, her interest rate was 6.6 percent. Now it’s only 4.2 percent. “It was a real blessing,” she said.
Here are a few questions and answers about HARP.
Which mortgage loans are eligible for HARP refinancing?
Loans must have originated on or before May 31, 2009, and must be owned or guaranteed by either Fannie Mae or Freddie Mac. The property must have a loan-to-value ratio — the mortgage divided by the home’s value — of 80 percent or higher. (For example, a $140,000 house with a $130,000 mortgage would have a loan-to-value ratio of about 93 percent.) The borrower must have had no late payments in the previous six months, and no more than one late payment in the previous year.
Do you have to do HARP refinancing with your current lender?
No. You should start by contacting your current loan servicer, but you should also check other lenders to compare rates and fees, said Ms. Lantz at Zillow. To find participating lenders in your area, search on the HARP website:
If a loan officer does not mention HARP to you – be sure to ask about it.
How will the new refinancing option available differ from HARP?
Borrowers will generally have to be current on their payments. Unlike the prior HARP, the new refinancing option will not have a cutoff date, so loans made after May 2009 may be eligible. And also unlike the prior HARP, borrowers can use the new refinancing option more than once.
Freddie and Fannie say they will announce more details in November. So be sure to join the Best Black Buys email list for updates!
Contact Your Mortgage Company
Ask if they are an approved HARP lender. Since you are a current customer, your lender already has your loan file. However, they will need you to provide the information necessary to verify your current source of your income.
Contact a HARP Lender
Find a list of approved HARP lenders at one of these pages. Tell them you are interested in refinancing, and you want to see if you qualify for HARP.
Did someone tell you “NO?”
If a lender says you are not eligible for HARP, ask for specific reasons why. If you have good reason to believe you are eligible, ask to speak to the HARP specialist, or consider talking with a different lender. It never hurts to get a second opinion.
If your lender determines that you do qualify for HARP, they will guide you through the application, approval and closing process.
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The HARP Mortgage Refinancing Program is stilll available!