For homeowners who are underwater on their conventional mortgage, the government has enacted a new Home Affordable Refinance Program to help eligible participants pay down the principal without having to pay mortgage insurance.
The new HARP 2.0 Refinance Program was made available to U.S. homeowners March 17, 2012, and those eligible can refinance by Dec. 31, 2013.
"The new HARP program has eliminated the maximum loan-to-value, so if you owe a lot more than your value, and if you have been current on your mortgage payments, this program may be for you. The program is meant for those that can afford their mortgage but want to refinance without mortgage insurance. The main criteria is your loan is currently with Fannie Mae or Freddie Mac and done prior to June 1, 2009," said Fran Peart Mitsumura, branch manager of First Hawaiian Mortgage in Lahaina.
"If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105 percent."
The original HARP program (also known as Making Home Affordable) was started in April 2009, and changes were introduced last fall by the Federal Home Finance Agency and confirmed by Fannie Mae and Freddie Mac. This program had several roadblocks that made it difficult for homeowners to refinance. For instance, the program only assisted those with mortgages with a loan-to-value ratio between 80 and 125 percent, but in many hard-hit housing markets, homes have lost more than half their value, making owners ineligible.
To be eligible today, a loan must be backed by Fannie Mae or Freddie Mac, and the mortgage must have a securitization date prior to June 1, 2009. FHA, USDA and jumbo mortgages are not HARP-eligible.
One of the changes in HARP 2.0 is that borrowers will now be able to refinance, regardless of how much their homes have depreciated. Previous loan-to-value limits were set at 125 percent.
Appraisals and underwriting have become less restrictive, and in some cases even eliminated, depending on electronic approval requests and the loan-to-value, as most homeowners will no longer be required to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.
Certain risk-based fees for borrowers who refinance into shorter-term loans will either be eliminated or modified. HARP only applies to first mortgages.
"HARP 2.0 is meant for first mortgages only," Mitsumura said. "Second liens are meant to be subordinate. You'll get to replace your first mortgage, and your second mortgage will remain as-is and will need to be subordinated to the new first lien."
Remember, the Home Affordable Refinance Program is not meant to save a home from foreclosure. It's meant to give underwater homeowners a chance to refinance without paying PMI.
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Greg Smith, R(B), can be reached at (808) 357-4782 or online at www.MauiRealEstateLLC.com. Prudential Maui REALTORS is independently owned and operated, Equal Housing Opportunity.