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Mortgage Refinancing with the HARP 2.0

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By now you have likely heard commercials on the radio, or read a news article that discussed the revolutionary mortgage refinancing plans, called HARP 2.0 that have been endorsed by the U.S. Congress, Fannie Mae, Freddie Mac, and President Obama himself. Nationwide lenders posted some breaking news on their website about the latest changes of the Home Affordable Refinance Program that will be opening the door for millions of underwater borrowers to finally qualify for home refinancing. With fixed refinance rates coming available in the 3% range, the timing could not be any better. Clearly this could be a step in the right direction to help the housing sector finally rebound. It probably won’t hurt Obama’s reelection campaign either.

Nationwide recommends reading up on the Home Affordable Refinance Program 2.0 to determine if you are eligible and if refinancing with this program is the best option for your personal situation. Here are some articles that Nations Lending and MRBuzz recommends reading first:

At MR Buzz, we believe it is important to shop HARP lenders and compare interest rates, terms and costs before committing to a refinance for thirty years.  Also don’t forget that the HARP Refinance Program ends December 31, 2013. There has been chatter about a HARP 3.0, and if that chatter turns into buzz, you can bet that the blog at Mortgage Refinancing Buzz will be the first to report on the facts. If you have additional questions about getting government mortgage relief, we suggest calling the housing helpers at 888-995-HOPE (4673).

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Economists are hopeful that an effective mortgage refinance program that extends relief to distressed homeowners who are stuck with underwater mortgages could help the country finally bury the housing crisis. Although the Obama administration announced the latest version of Home Affordable Refinance Program a few months ago. The details of this new version called HARP 2.0 are just being released to mortgage originators.

There has been a loan program in place, HARP, under which lenders were able to refinance underwater homeowners. The original HARP mortgage program theoretically allowed a homeowner with a loan held by Fannie Mae or Freddie Mac to refinance a current mortgage that was up to 125% of the home’s current value. However, even though Fannie and Freddie allowed lenders to go up to 125%, most lenders would impose their own restrictions that held their maximum loan amounts to 105% of a home’s value. Historically, lenders have only allowed refinancing up to 90 or 95% of a home’s value.

Basically, the new version of HARP 2.0 has waived all loan to value requirementswill allow homeowners to refinance without regard to income, credit score or home value as long as the current mortgage is larger than 80% of the home’s value. Only those loans originated before May 31, 2009, will qualify. There has been much discussion about what rates will be offered under this program. Although the pricing is not supposed to be risk-based, the rates could be higher than for conventional refinances. In the past 125 loans and bad credit house loans carried higher interest rates.

Considering that homeowners who can take advantage of this program will likely not get another chance to refinance an upside down mortgage and given that neither Fannie nor Freddie will expect lenders to pay back loans that go into default, the new HARP loans should help lenders retain their servicing portfolios, which in turn will encourage them to offer these loans. Unfortunately, loans that were not sold to or guaranteed by Fannie Mae or Freddie Mac will not qualify, which leaves out many of the loans that really would benefit from refinancing like jumbo loans and the negatively amortizing loans and other creative loan products that were so popular with World Savings, Washington Mutual and Countrywide, as well as others.

There is also confusion as to whether or not homeowners with second mortgage loans and HELOCS will be able to take advantage of this program. To find out if your loan is owned or guaranteed by Fannie Mae or Freddie Mac, go online to either Fannie Mae HARP or Freddie Mac Home Affordable Refinance. This refinance program is for primary residences, second homes and investment properties. To qualify, homeowners cannot have had a mortgage late in the past 12 months and the new payment must be either more affordable or more stable than the current loan. We assume that a homeowner may include closing costs in the new loan amount but may not receive any cash back from the refinance. As of December 1st, HARP loans can be originated and the Obama administration says the program will end December 31, 2013.

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The National Mortgage News released a report today that indicated that the underwater mortgage programs is showing signs of life, as homeowners who owe more on their mortgage than their homes have been successfully refinancing.  It’s always challenging for lenders to approve mortgage refinancing for borrowers who have a negative equity.  According to the Federal Housing Finance Agency report, Freddie Mac and Fannie Mae approved nearly 3.6 million refinance loans in 2010 with 11%. The report revealed that the mortgage refinance volume was directly connected to the 125% loan program endorsed by the Home Affordable Refinance Program (HARP). In 2010, GSEs confirmed a significant increase in home mortgage refinancing with 1.37 million refinance loans closed.  38% of the high LTV loans funded in the fourth quarter.

The Home Affordable Refinance Program Offers a Solution with No Equity Refinancing

The latest FHFA report indicates a major increase in the fourth quarter for high loan to value refinance loans under the HARP program.  This home refinancing relief program was created to offer high LTV refinance loans that the GSEs already guarantee.  Unlike FHA loans, with the Home Affordable Refinance Program, borrowers are not required to pay for monthly mortgage insurance.  In the last few years, no equity refinance options have been difficult to find, but the FHFA reveals that the high LTV loan program works as thousands of distressed homeowners were finally able to refinance their home, even though they were underwater.

Watch this video about the Home Affordable Refinance
  • Refinance up to 125%
  • No Equity Required
  • Fannie Mae Mortgages
  • Freddie Mac Loans
  • Low Fixed Rates
  • Rate and Term Refinancing
  • Lower Payments
  • No Cash Out

In the fourth quarter, the GSEs completed 131,150 refinance transactions of conventional mortgages with loan to value ratios up to 105%.  In 2010, Fannie Mae and Freddie Mac closed close to 403,000 100% refinance transactions.  The HARP program also allows the enterprises to refinance loans with LTVs above 105%, up to 125%.  Fannie and Freddie completed 28,700 underwater refinance loans of these underwater loans last year, including 10,800 in the final quarter. Since the Home Mortgage Refinance program was launched in the spring of 2009, lenders have closed 30,600 refinance loans in the 105% to 125% range.

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Unfortunately, many homeowners have no home equity and have been unable to qualify for a mortgage refinance loans that would save them thousands of dollars a year in interest.  The reality is that not all borrowers are able to meet the 2017 refinance guidelines with FHA and conventional lenders.  With refinance rates falling to 50-year lows a few months ago, many homeowners are kicking themselves for not seizing the opportunity that refinancing presents with lower monthly payments.

The most common factors that contribute to borrower’s inability to qualify for home refinancing in 2011 is bad credit scores, lack of equity and insufficient income.

Most homeowners have gone the traditional route only to be turned down for a logical refinance loan that would lower the borrower’s loan payment and increase the likelihood that they won’t default on the mortgage. There are several mortgage relief programs that have helped distressed homeowners successfully reduce their mortgage payment.  The Home Affordable Refinance Program is a unique loan solution that enables homeowners to qualify for a 125% mortgage refinance.  This is a rate and term program that allows refinancing with no cash out or debt consolidation options, but certain restriction apply. The HARP program enables qualified borrowers to get approved for fixed-rate mortgage refinancing.  If you have a second mortgage, the 2nd lender must agree to subordinate the lien.

Borrowers Must Meet the Following Home Affordable Refinance Program Qualifications:

  • The owner of a 1-4-unit home with a mortgage owned or by Freddie Mac or Fannie Mae.
  • Borrowers cannot be currently delinquent on their mortgage
  • Borrowers cannot have been more than 30 days late on a mortgage payment in the last year
  • Borrower must be able to document the ability to afford the proposed refinanced payment
  • The refinance loan cannot exceed 125% of the value of your property.
  • Borrowers must have at least a 620 FICO score

Don’t wait any longer because the Home Affordable Refinance Program expires at the end of June 2011.  Talk to a loan officer today and reap the benefits of a no equity mortgage refinance.


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