by Victor Valquez
(New York, USA)
The real estate market in many areas is worse than it was during the Great Depression of the 1930s. In some areas homes are slowly returning toward previous values but recovery will take a very long time. In the meantime, there are now more homeowners left owing more than theirhomes are worth than at any time in modern history.
Many of these homeowners are still facing interest rate increases on adjustable rate mortgages as introductory rates expire. Others have high interest rate subprime mortgages that they planned to suffer through until they repaired their credit. Now that their credit is repaired, theirhomes no longer qualify for refinancing because they owe more than the value of the home. These people are now faced with potential foreclosure when they can no longer afford their mortgage payments.
Several years ago, the government instituted the Home Affordable Refinance Program in order to help these borrowers. Unfortunately, very few people ever fit the guidelines of the program and almost no one received any help. In order to fix this problem, the program has now been substantially modified and improved so that homeowners can qualify and actually obtain assistance. In fact, as of May 2012, Home Affordable Refinance Program loans represent 20% of the total refinance activity in the country. This is the largest increase since the beginning of the program in 2009.
Under the Home Affordable Refinance Program’s guidelines when the program was first offered, the new loan amount could not exceed 125 percent of the current appraised value. This didn’t work for most borrowers who attempted to refinance using the program. Housing values in many areas have dropped to levels not seen since the late 1990s. This has helped to exacerbate the glut of foreclosure homes on the market and which may decrease values even further. The new program removes the 125% loan to value limitation for fixed rate. It also removes many of the extra fees that were added to loans made under the program originally. This has enabled many more borrowers to take advantage of the program.
To meet the guidelines for refinancing under the Home Affordable Refinance program, your original mortgage must be owned or guaranteed by Freddie Mac (FHLMC) or Fannie Mae (FNMA). Most borrowers have no idea how to find out this information. In fact, most don’t even know exactly what it means. Although you may be making your payments to a particular lender such as Wells Fargo or Bank of America, those lenders have most often sold your loan to Fannie Mae or Freddie Mac and they are simply being paid by Freddie Mac or Fannie Mae to collect and manage your payments. You can easily find out whether your loan is owned by Freddie Mac by calling 1-800-FREDDIE (800-373-3343). You can find out if your loan is owned by Fannie Mae by calling 1-800-7FANNIE (800-732-6643.
In order to qualify for the Home Affordable Refinance program, your loan must have been transferred to Freddie Mac or Fannie Mae on or before May 31, 2009. So if you bought or refinanced after that date, you are not eligible for the program. Luckily, if you got your loan after this date it is very likely that you were able to avoid most of the drop in value caused by the real estate crash. In addition, you probably already paid a lower price for your home and were able to obtain a low fixed rate mortgage.
You must owe more than 80% of the current appraised value of yourhome in order to meet the qualifications of the program. Of course, if you owe less than 80% of the value of your home, you already qualify for a standard refinance and have no need for a special program.
One bit of advice many homeowners have been receiving is that in order to qualify for special mortgage modification programs they should stop making payments on their mortgage. In the beginning days of the real estate crisis, this might have been good advice for some people. However, under the Home Affordable refinance program, you MUST be current with the payments on your mortgage. You cannot have paid your mortgage late at any time within the past six months or been late more than once within the last year.
If you have already refinanced under the original Home Affordable Refinance Program, you are not eligible to refinance under the present guidelines. Since the original program barely allowed any homeowners to qualify, this Is not a problem for the vast majority of people. Although the guidelines for the HARP 2.0 program were announced in November 2011, implementation of the program took several months and the program was only opened to all lenders on March 17, 2012. If you have previously attempted to apply for the program and you were turned away, you definitely should try again.
In today’s climate of crisis, many people are simply walking away from their homes and leaving the problem to the bank. With the new guidelines for the Home Affordable Refinance Program, such a dishonorable business decision can now be avoided and you can refinance with today’s record low mortgage interest rates and keep your home and your honor.