Home Affordable Refinance Program

HARP 2.0 is the latest version of the home affordable refinance program. This program was created primarily to assist homeowners to refinance and take advantage of lower interest rates. It is most often for those who lost equity in their homes, but continued to make all their mortgage payments on time.

To qualify for a HARP loan you must have no more than 1 30 day late payment in the last 12 months and the late payment cannot have been within the last 6 months. Also, you can only do one HARP refinance, so if you have already refinanced through the program before, you cannot do it again.The home affordable refinance program continues to change and hopefully when the next revision comes out (HARP 3) there will be opportunities to refinance for even more homeowners.

As of today's date, which is 6/7/2014, there are lenders who will lend up to 175% of your market value on a first mortgage. Any 2nd mortgage financing must be resubordinated, and with HARP 2 there is no upper limit on the combined loan to value. (CLTV-your combined loans to value) The second mortgage holder must agree to the refinancing and usually this is not a problem since by lowering your rate and monthly payment on your first mortgage, you are making their loan more secure. For a secondary home, it is possible to do a HARP loan however the loan to value is restricted to 125% LTV, and it is restricted to 105% on an investment property.

There are two programs for HARP, and both of them require that your loan is backed by either Fannie Mae or Freddie Mac prior to 6/1/2009. While your loan payments are usually sent to a loan servicer, it is still possible that your loan is backed by one of the two agencies. The way to find out is to search both agency databases. The majority of loans originated prior to 6-1-09 wound up at Fannie Mae, so it's usually best to check this database first. Both agencies have lookup tools where you can input your property address information and find out if a match is found. These two lookup tools may be found on the Pacific West Capital website on the HARP loans page.

The Fannie Mae program has more lenient guidelines as far as the LTV is concerned. The Freddie Mac Open Access program is usually capped at a maximum of 125% LTV with no upper limit for seconday financing. The interest rates on both programs are comparable to a regular refinance program with a conventional lender. In case you do have secondary financing on your home, under current HARP guidelines, it is not possible to combine your 2 loans together. This may change one day but for now this is how it works. Your existing 2nd mortgage must be resubordinated to the new first mortgage.

Another advantage is the flexibility with mortgage insurance. If you qualify for a HARP loan and your current loan does not have mortgage insurance on it, (MI) you will not be required to have any MI on the new loan regardless of your LTV. Typically any loan over 80% of market value will require MI. If you put down 20% or more when you bought your home, and your home value decreased putting your LTV above 80%, you will not be required to have MI on the new loan since your current loan does not have MI on it.



ABOUT THE AUTHOR 

Scot King is a licensed mortgage broker in California. His company, Pacific West Capital has been helping homeowners to refinance and homebuyers to purchase housing since 2002. He has been in the mortgage industry since 1998 and his company is an Accredited BBB business with an A+ rating. For more information visit the HARP loans page at Home Affordable Refinance page: http://www.mortgage-pros.com/home_affordable_refinance.aspx . There are links to both agency lookup tools available on the PWC website.