In spite of recent improvements in the U.S. economy, a number of housing markets have not fully recovered from the national housing crisis. In these areas, the multi-year decline in home values continues to affect many homeowners, whose loan balances exceed the value of their homes, a situation often referred to as being “underwater” or having negative equity.
To assist these homeowners, the Federal Housing Finance Agency (FHFA) and the U.S. Department of the Treasury worked with Fannie Mae and Freddie Mac to establish the Home Affordable Refinance Program (HARP). Originally launched in April 2009, the program was recently overhauled to extend the benefits of a refinance to more American households. HARP isn’t the only government program available to homeowners who are looking to refinance their mortgages, but it is uniquely designed for borrowers who are current on their monthly mortgage payments and who owe more than their homes are worth.
What can HARP do for you?
If you bought your house a few years ago and are making your monthly mortgage payments but the value of your home has dropped, you may qualify for a refinance under HARP.
Given today’s low interest rates, a refinance could enable you to reduce your monthly payments to free up some of your income to meet other expenses; to shorten your loan term to pay down your mortgage faster and save you money over the life of your loan; or simply to switch from an adjustable to a fixed-rate mortgage for peace of mind that your rate won’t change in the future. More importantly, a number of program changes mean that more borrowers are eligible to take advantage of these benefits, so even if you’ve been turned down for a refinance before, now is definitely the time to review your options again.
Could you qualify?
If you meet the following eligibility requirements you may qualify for a HARP refinance:
- Your loan must be owned or guaranteed by Fannie Mae or Freddie Mac, and have been sold to one of these companies on or before May 31, 2009. (Check their online lookup tools to see who owns your loan.)
- You must be current on your mortgage — that means no late payments in the past six months and no more than one late payment in the past 12 months.
- Your loan-to-value (LTV) ratio must be greater than 80 percent.
HARP isn’t limited to primary residences; second homes and investment properties can also be refinanced under HARP. In 2012, HARP was enhanced to make it easier to qualify for the program and help homeowners like you save money. Some of the most important changes include:
- Loan-to-value limits were removed, allowing homeowners above 125 percent to participate.
- Most homeowners will not have to get an appraisal or have their loans underwritten, making the refinance process smoother and faster.
- Certain fees were reduced and were removed altogether for borrowers choosing to refinance into a shorter-term loan.
HARP was also recently extended through Dec. 31, 2015, and so far more than 2.8 million homeowners have taken advantage of the program.
Visit www.HARP.gov to learn more about the program, and find out if you are eligible by visiting the online lookup tools by Fannie Mae and Freddie Mac. Then, talk to your lender to discuss your options.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
About the author:
Meg Burns is senior associate director for the Office of Housing and Regulatory Policy of the Federal Housing Finance Agency (FHFA).
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