What is Home Affordable Refinance Program?
The Home Affordable Refinance Program (HARP) is a special program for Fannie Mae and Freddie Mac borrowers, with an excellent payment history, to refinance their mortgage to a lower interest rate regardless of their home’s lost value. With so many homes under water, homeowners are unable to refinance with traditional lenders due to their stringent underwriting guidelines. But the HARP program enables strong borrowers to take advantage of lower interest rates. This program aims to help 3 to 4 million at risk homeowners and is available through June 30, 2011. The HARP loan is a new loan and would require full documentation, underwriting, and loan closing fees.
Borrowers must provide a hardship letter explaining that a change in their economic circumstance or a rise in mortgage payments will lead to a default. Borrowers must also demonstrate a solid payment history.
The eligibility guidelines are as follows:
- Must be a primary residence.
- Borrower must not be more than 30 days late on a mortgage payment for the past 12 months.
- Loans must have originated before January 1, 2009.
- Loans can be refinanced or modified up to the current jumbo loan limit.
- Mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac.
- Mortgage must not be a USDA, VA, or FHA loan.
- Borrower must owe more than the house is worth but the mortgage does not exceed more than 125% of the current market value of the home.
- Borrowers must fully document income, sign an IRS 4506-T, provide two most recent pay stubs, provide most recent tax return, and sign an affidavit of financial hardship.
Part of the program includes incentives to extinguish second liens, which will make it easier for borrowers to meet the desired debt-to-income ratio target of 31 percent. It’s a bit unclear how high the loan-to-value will go on Fannie Mae and Freddie Mac refinances, but it was thought the 105% cap might be lifted.
If you have any questions or need help with a HARP, please contact us.