On Monday, President Obama’s administration did something that most private firms do on a regular, and arguably timelier, basis—they revisited and adjusted their plan. The two-and-a-half-year-old Making Home Affordable Refinance Program, more commonly know as HARP, was one tool in the administration’s toolkit that provided direct assistant to homeowners by targeting those who were suffering from, and continue to be burdened by, the historic tumble in the values of their homes, but who have been able to continue making their mortgage payments on time. With his executive order, HARP can now potentially help approximately 800,000 more struggling homeowners.
How to Tell If You Qualify
So, how do you become one of the potential 800,000 to get cash flow relief thru lower mortgage payments? First, do your own personal eligibility check. You’re checking to assess you mortgage payment pattern over the past 12 months. Have you made ALL of the last six payments on your mortgage on time? Yes? Good. Then ask yourself if you have made ALL of the last 12 months of payments on your mortgage on time except for maybe only 1 that was only 30 days late the past 7-12 months? Yes? Very Good. Finally, do you have a means to make your mortgage payment, such as a job or other revenue sources that are sufficient to cover your household expense? Yes? Excellent! You’ve passed your personal assessment test.
What You Need to Do to Prepare
Make sure you closed on your original mortgage prior to May 2009 that you haven’t “HARP’d before, and that your mortgage is owned by Fannie Mae or Freddie Mac. Both have an easy look up screen web sites, www.freddiemac.com and www.fanniemae.com.
There are a few other changes that work in your favor. There is no longer a restriction on how much your house is underwater. The old program limited the underwater state of your house to be 125% loan-to-value. ie., the current value of your house is 25% less than the amount that you owe on your first mortgage. Also, under the enhanced HARP, there may not even be a need for the cost, which you pay for, or delay of an appraisal as the program will now allow the lenders to use reliable values that come from the Fannie and Freddie models on many the homes seeking a HARP.
What Else You Need to Know about HARP
Next, know that you can elect to have a shorter-term mortgage without paying a fee. You can refi into a 15, 20 year or other fixed-rate mortgage from your lender, which could allow you to build back equity faster and still possibly lower your mortgage payment. The 30-year option is always available as is the option to refinance into an adjustable rate mortgage product. However, the ARM product is limited to 105% LTV.
If you originally purchased the home as your primary residence but have since turned it into a rental property, it is now eligible for the HARP program. The original HARP required that you were still living in the house.
For those readers who currently have a second mortgage or home-equity line of credit (HELOC) on your home, you can ask the lender to “re-subordinate” it.. Only the first mortgage that you are attempting to refinance is included in the loan-to–value calculation and the refinance transaction.
Finally, you can apply for your HARP refinance through ANY lender offering the program. Remember, to stay away from companies who are not authorized lenders and who are offering to help you thru this process for a fee. HUD approved counselors are available and can provide most home retention counseling services free of charge if you are finding the process to be challenging. Read more about this service at www.hud.gov.
The enhanced HARP is scheduled to be available to you during the first quarter of 2012. You now have until December 31, 2013 to apply for this program instead of June 2012, which was the original program end date. But why wait when rates are this low?
Ingrid Beckles is the Founder and CEO of The Beckles Collective, LLC a Washington DC based executive consulting firm specializing Mortgage Banking, Housing Policy, Real Estate Management, Neighborhood Stabilization and Process Optimization. Ms. Beckles is the former Senior Vice President and Head of Default Asset Management for Freddie Mac. www.thebecklescollective.com.