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To refi, learn to play the HARP
by Annie Christian
Apr 13, 2012 | 1464 views | 0 0 comments | 12 12 recommendations | email to a friend | print
Annie Christian
Annie Christian
“Fill out a quick and easy form to refinance your house,” so the online mortgage company advertisement says. Homeowners who are desperate to lower their payments will fill out anything or call anyone just to find out that to refinance their home they must have equity.

Whether you are looking to lower your monthly mortgage payment, switched to a fixed-rate or even get cash out for a major expense, you need equity, the mortgage company says. How discouraging is that for the 25 to 50 percent of homeowners who are underwater and have no chance of refinancing?     

The government’s Home Affordable Refinance Program (HARP), 2.0, is designed to make it easier for certain homeowners with little or no equity to refinance their mortgages.

HARP is part of the government’s Making Home Affordable Program for at-risk homeowners.  This program is designed for homeowners who are current on their mortgage payments but have not been able to refinance to a lower interest rate because their loan balance exceed the current market value for their home.  This is generally known as being underwater on their mortgage — owing more than the property is worth.

Homeowners with a mortgage backed by Fannie Mae or Freddie Mac can quality for HARP. There is a pretty good chance you do, unless you have an FHA or VA loan, or your home was costly enough to require a jumbo mortgage; before the crash, Fannie and Freddie Mac guaranteed the great majority of middle-class mortgages in this country.

HARP is not strictly limited to underwater mortgages.  In fact, many of the home loans refinanced under HARP have been mortgages where borrowers had some equity, but not enough to qualify for a conventional refinance.  HARP refinances are allowed on mortgages with a greater than 80 percent loan-to-value ratio — i.e., less than 20 percent equity — as well as on underwater mortgages where the borrower owes more than the property is worth.

What’s New?

125 percent cap lifted: Perhaps the biggest change in HARP 2.0 is that there is no longer a limit on how far underwater your mortgage can be and still be able to refinance. Previously, there was a 125 percent loan-to-value limit on mortgages refinanced through HARP — that is, the balance owed on your mortgage could be no more than 25 percent greater than the value of your home.

Under the new rules, it does not matter how much your home has fallen in value, you can still qualify to refinance your mortgage.

Automatic appraisals: The new rules for the program allow lenders to use automated systems to produce an estimated value for your home, rather than requiring an actual appraisal.  This offers several benefits to you, the borrower.  First, an automated appraisal means you don’t have to pay for having an actual appraisal performed, which can save you several hundred dollars (between $400 and $600 usually).  It is also a faster process to refinance your home.

HARP 2.0 is an easier program to qualify for, since with the loan-to-value cap lifted, they are not worried about getting a precise estimate of your home value.  A lender may still require an actual appraisal in some situations, however.

Fees reduced: Certain risk-based fees, called loan-level pricing adjustments, have been eliminated under HARP 2.0 if you refinance into a mortgage of 20 years or less.  On mortgages refinanced into a 30-year terms, those fees have been capped at 0.75 percent, or $750 per $100,000 of the mortgage. You may be able to roll the fee into your loan or have it eliminated in return for paying a slightly higher interest rate.

Do I have to make a

certain income to qualify?

HARP 2.0 refinance does not require you to meet any income requirements, unless your payments are increasing by more than 20 percent monthly due to shortening the term of the loan. 

(Consult with an experienced local loan officer for guidelines details.)

Does the HARP 2.0 program sounds too good to be true?  Maybe. For most homeowners who are severely underwater, lowering the monthly payment by a little is just a temporary fix.   What most homeowners want and need is for their lien holders to lower their loan balance.  Maybe the government will be able to offer such a program when the economy recovers.  

Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is
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