With a staggering 75 million American homeowners underwater, Uncle Sam has finally thrown out a lifeline.The federal government has revamped the Obama administration’s 3-year-old Home Affordable Refinance Program with a new and improved model, dubbed HARP 2.0 – and already it has helped 750,000 homeowners refinance their loans so they can save their homes.
The newly streamlined plan is designed to reward homeowners who diligently pay their underwater mortgages, affording responsible borrowers the chance to refinance their loans and get out from under the high interest rates that have had them trapped in hopeless resignation.
The program is only available to those with loans owned or backed by Fannie Mae and Freddie Mac, the government-controlled mortgage buyers that handle 60 percent of U.S. home loans. The borrowers are refinanced into new loans that take advantage of current low interest rates. The loans are then sold back to Fannie or Freddie, which, instead of getting stuck with potentially defaulted mortgages, have more viable loans on the books – and happier homeowners with more disposable income to invest in the local economy.
Some highlights:
• Most loans require no maximum loan to value.
• No appraisal is required on qualified loans.
• There is no minimum credit score required, as long as the borrower has had no late mortgage payments for the last six months.
• No maximum debt-to-income ratio is set in most cases.
• Primary homes, vacation homes and investment properties are all eligible.
• The loans must have originated no later than May 31, 2009.
In many cases, it’s a win-win for all parties. Many homeowners are getting new loans at record-low interest rates, even though they owe far more than their homes are worth – and they’re staving off foreclosure.
But like any government program, HARP 2.0 is less than perfect. Some homeowners still don’t qualify – reverse mortgages and defaulted loans aren’t eligible, for example – and others have to deal with regulatory red tape the revamped program was supposed to eliminate.
Lawmakers, though, are already working on a solution. Encouraged but still unsatisfied with the 750,000 underwater borrowers with no home equity who have been helped by the re-fi plan, President Obama and his U.S. Housing and Urban Development Secretary are backing proposed legislation that seeks to drive down costs to borrowers and lenders even further.
But until then, it is essential for homeowners to be fully educated on their re-financing options, especially in today’s more borrower-friendly market, which is experiencing some of the lowest interest rates on record. Being under water on your home is no longer the hopeless scenario it was a year or two ago. In many cases, HARP 2.0 can help.
