HUD announced today what has been rumored for a while, namely that they are expanding the guidelines on the Home Affordable Refinance Program (HARP), to make it easier for homeowners who are “underwater” on their mortgages to take advantage of low interest rates and refinance.
The biggest news in the announcement was that the maximum loan amount for HARP refinances is being raised from 105% of a home’s current value to 125% of that home’s current value. Under the current (105%) guidelines, a homeowner who owes, say, $321k on a home worth $300k would not be able to refinance, since $321k is 107% of $300k, and is thus outside the current limit; under the new guidelines, that same homeowner with a $300k house could refinance even if they owed up to $375k (125% of $300k).
Don’t expect this change to have an overnight impact, though. When the HARP plan was originally rolled out, it took a month or two for lenders to start offering it, as they had to design entirely new internal systems to deal with it, and the pricing on it in terms of fees and rates were initially abysmal; it was only after lenders had some time to work out the kinks in the program and see how much market demand there was for it that pricing became reasonable and the mortgage brokers were able to start using it to legitimately help borrowers. (Also delaying the 125% program will be the fact that as far as I can tell SIFMA, the regulator for mortgage bond markets, hasn’t yet approved allowing bonds for the new 125% version of HARP mortgages to be sold. Presumably the Obama administration will get that resolved quickly, but it’s one more delay in the process.)
(Also, for those who think that this change might be enough to pull the economy out of the recession: don’t hold your breath. A recent report from the Comptroller of the Currency indicates that, among other things, a quarter of all homeowners who have already had their mortgages modified to reduce their payments have already gone delinquent on their new, lower payments within 60 days of the modification, implying that the poor financial habits that got a lot of people into the current mess aren’t going to change just because one of their monthly bills was reduced.)
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Ditech Home Loans
on Jul 8th, 2009
@ 5:58 pm:
Could be a good incentive to prevent underwater borrowers from walking away from their mortgage.
The basic guidelines for the 125% refinance loan program include the following:
• Applies to home loans originated on or before January 1, 2009 • Current home loan is is serviced or backed by Fannie Mae or Freddie Mac • No 30 day mortgage lates in the past 12 months • Income must support the new mortgage payments • New mortgage will not exceed 125% of the current market value of the property
Arvind Srivastava
on Jan 19th, 2010
@ 7:20 pm:
Are aliens who are waiting for Green Card and working on EAD with valid A# eligible for refinancing under HARP?
sweth
on Jan 19th, 2010
@ 7:28 pm:
Arvind: Non-permanent resident aliens who are legally able to work in the US are eligible for the HARP refinances. Depending on your visa type, that may or may not mean that you need an EAD before being eligible; e.g. TN visa holders are eligible to work but do not receive EADs. If you’d like to send us more information about your scenario using the contact form on this website, we can help you determine if you are eligible or not.
Arvind Srivastava
on Jan 19th, 2010
@ 7:39 pm:
Hi Sweth: Thanks a lot lot for such a prompt response. I and my wife both have EAD and vald A# but I get an impression from my lender that we are ineligible to be refinanced under HARP because we don’t have valid visa and no Green Card. Can you please give a specific reference to a government document that supports our eligibility of refinance under HARP?
We have been paying our mortgages regularly before the due date, we have excellent credit history as confirmed by the lender. We have been living in our home for last 1.5 years and filing our taxes regularly.
I shall appreciate your prompt reponse.
With best regards,
Arvind