HARP 2.0 Program is designed to assist distressed residential property owners.

04/17/2012

HARP Program Homeowners who were unqualified for the Home Affordable Refinance Program might obtain relief through the HARP 2.0 program. The latter program offers revisions to ease the refinancing process for homeowners who lacked sufficient equity requirements under the original guidelines. The new program could potentially help millions of homeowners. Borrowers a with mortgage loan that exceeds 80 percent of their home’s market value may qualify for the HARP 2.0 program. If you have an underwater mortgage loan that is owned by Fannie Mae or Freddie Mac, you may be positioned to refinance with your current lender or with other mortgage lenders in the marketplace.

Underwater Lending Challenges

Real property that has greater liens than its market value is typically deemed as an underwater asset. Underwater real estate may consist of residential and commercial properties. The HARP 2.0 program is designed to assist distressed residential property owners. When the original loan program was introduced, borrowers were limited to a loan-to-value cap of 125 percent. Many borrowers had loan-to-value ratios that exceeded 200 percent. Underwater loan originations generally place lenders and investors in an extremely risky position. For instance, a borrower who needs to refinance a $200,000 loan amount against a home that is worth $100,000 has an obvious underwater lending challenge. If a banker decides to extend credit terms based on the aforementioned scenario, the financial institution may experience significant losses in the event of a loan default. Banks and other mortgage lenders frequently sell home loans to investors such as Freddie Mae and Fannie Mac. Loans that exceed certain industry guidelines are difficult to sell. Lenders generally retain loans that investors refuse to buy. Too many high-risk loans could negatively impact a lender’s investment portfolio.

Qualifying Under the New Guidelines

New guidelines enable mortgage lenders to exceed previous loan-to-value thresholds. If your mortgage loan exceeds the value home by 125 percent, the HARP 2.0 program might be the refinancing vehicle for your needs. Recipients of previous HARP loans are ineligible. Loans that Fannie Mae or Freddie Mac purchased before June 1, 2009 are eligible. Borrowers must have a positive mortgage rating. Your mortgage must be current and reflect zero late mortgage payments within the previous six months. If more than one mortgage payment exceeded the due date by 30 days during the past year, you are unlikely to qualify for the HARP 2.0 program.

Considerations

Housing initiatives that positively influence the economy and investor sentiment are often welcomed. Some mortgage lenders may participate in the program, as HARP 2.0 is a voluntary refinancing solution. Several well-known mortgage lenders have expressed an interest toward implementing the program to assist homeowners. Automated underwriting systems have been updated to reflect the HARP 2.0 program guidelines. Lenders who decide to participate can receive quicker loan decisions that meet Fannie Mae and Freddie Mac guidelines.

Summary

HARP 2.0 offers more relaxed loan-to-value guidelines and removes the prior lending caps. Eligible homeowners might be able to refinance an adjustable-rate mortgage to secure a more attractive fixed-rate loan product. Obtaining a loan under the HARP 2.0 program guidelines might be easier with your current lender. Other lenders in the market may provide competitive refinancing terms too. Homeowners are encouraged to comparison-shop several mortgage lenders for details about the HARP 2.0 program.

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