What is HARP 2 and Am I Eligible?

The Obama Administration’s phase 2 of the Home Affordable Refinance Program (HARP), or HARP Phase 2, is to assist homeowners whose mortgages are underwater and pay their mortgages on time.  This program lets them refinance their mortgage to take advantage of low rates, even though they have negative equity in their home. Approximately 20 million homeowners are eligible for this program, but their mortgages have to be backed by Fannie Mae or Freddie Mac. To find out if your loan is owned or guaranteed by Fannie Mae or Freddie Mac, go online to either http://www.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/.

Terms of HARP 2

Here are some of the highlights of HARP 2 and more information is still coming out:

Applies to loans originally sold to Fannie Mae or Freddie Mac on or before May 31, 2009.

Eliminates the loan to value (LTV) limits for fixed rate mortgages.  The ratio ceiling was 125 percent for fixed rate mortgages with terms up to 30 years guaranteed or owned by Fannie Mae and Freddie Mac.

Adjustable rate mortgages (ARMs) with fixed terms of 5 years and more or loans for greater the 30 years are limited to loan to value of 105 percent.

Eliminates requiring a new property appraisal where there is a reliable automated valuation model (AVM) estimate provided by the Fannie Mae or Freddie Mac.

Applications can be accepted as of December 1, 2011.

Extends the end date for HARP to December 31, 2013.

Eligible if pay mortgage on-time for the last 6 months and have only been late once in the past 12 months.

Don’t have to re-qualify for the mortgage, unless the new principal plus interest payment increases by more than 20%.

Credit and income requirements don’t apply, but the lender can still determine if you are an “acceptable credit risk”.  This definition has yet to be defined.

Applies to primary residences, second homes or condominiums.

If you don’t have Private Mortgage Insurance (PMI) now, you won’t have it when you refinance.

Closing costs can be added to the loan.

Not eligible

If you were in the program under HARP 1, you are not eligible for HARP 2.

If your loan originated or was sold to Fannie Mae or Freddie Mac after May 31, 2009, you are not eligible.

If you have been late paying your mortgage in the past six months or have been late more than once in the past twelve months, you are not eligible.

If your loan was not guaranteed or owned by Fannie Mae or Freddie Mac, you aren’t eligible.

Jumbo loans are not included.

HARP 2 helps both the lenders and borrowers.  The lenders don’t have to keep the loans that are underwater, which could still face foreclosure. This program is voluntary to lenders, so not all will participate. Underwater homeowners can refinance and take advantage of lower rates, which they couldn’t do previously, due to lack of equity.

How many will take advantage of this?  Those that do so, what will they do with the amount they save each month?  Will they spend, save and/or pay off debt?

Credit Damage Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Bankruptcy, Credit Report, Credit Score, Debt, Money & Identity

This post was written by John Ulzheimer