The Home Affordable Refinance Program is designed to allow homeowners who owe more than their home is worth to refinance at today’s attractive rates and terms. HARP was introduced in 2009 and the first version of the program allowed homeowners to refinance up to 125% of their home’s current value. Under the new version, HARP 2, the loan-to-value limitation has been lifted (at least for those with fixed rate loans).
If you owe more than your home is worth, here’s how the HARP program can help you:
Let’s assume that you purchased your home in December of 2006 for $300,000. Further assume that you made a 20% down payment ($60,000) and obtained a first trust deed for $240,000 @ 6.625% – fixed for 30 years. Because of the current housing market your home’s value has decreased to $190,000, but you’d still like to refinance and obtain a lower interest rate. Under HARP 2, assuming you otherwise qualify, you’d be able to refinance, notwithstanding the fact that you owe $50,000 more than your home is worth. The HARP 2 guidelines would permit a new loan with a loan-to-value of 132%. (This assumes paying off the $240,000 on the existing loan and $10,000 in closing costs for a new loan amount of $250,000). $250,000 / $190,000 = LTV of 132%
The general HARP 2 guidelines are set forth below:
- The mortgage must be owned by Fannie Mae or Freddie Mac
- The mortgage must have been originated prior to May of 2009
- HARP 2 expires 12/21/2013
- No LTV maximum for borrowers with fixed rate loans
- LTV maximum of 105% for borrowers with adjustable mortgages
- Mortgage must have been paid on time for the past 6 months and maximum of one 30 day late within the last year
- Reduced loan fees (program) – Amortization of 20 yrs or less – 0%, Amortization over 20 years – 0.75%
