New Refinance Opportunity With HARP Program by Jim Woodard on Creators.com

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New Refinance Opportunity With HARP Program

Many homeowners with “underwater mortgages” can still refinance their loan with a lower cost affordable mortgage thanks to the Home Affordable Refinance Program — recently revised and extended until Dec. 31, 2013.

Established in 2009 for Fannie Mae and Freddie Mac-owned mortgages, the HARP program provides an option for homeowners to refinance “underwater mortgages.” The program addresses situations where the homeowner's property value has fallen below the mortgage balance, causing the owner to no longer qualify under traditional underwriting criteria.

New HARP guidelines were recently announced by Fannie Mae and Freddie Mac. Both of these GSEs (government sponsored enterprises) have posted details of the program modifications and procedural changes on their respective websites for mortgage servicers to follow.

Key provisions of the program include the elimination or raised Loan-To-Value cap, and relaxed representation and warranty stipulations — changes that officials expect to at least double the number of homeowners with a HARP-refinanced mortgage. Since the program was launched, just under 900,000 borrowers have participated, it was announced.

Negative equity typically excludes a homeowner from refinancing through traditional channels. Removing previous LTV ceilings allows homeowners who are severely underwater, due to plummeting property values, to take out new loans at today's lower interest rates. There are, however, some LTV conditions depending on the loan type.

There are no LTV restrictions for fixed-rate mortgages with terms up to 30 years, including those with terms of 15 years.

For fixed-rate loans with terms between 30 and 40 years, LTV is limited to 105 percent. Likewise, a 105 percent LTV cap has been placed on adjustable-rate mortgages with initial fixed periods of five years or more and terms up to 40 years.

Any borrower with an LTV ratio below 80 percent is not eligible for a HARP refinance. However, both GSEs do offer assistance to these borrowers through their traditional refinance programs. The original mortgage must have been sold to Fannie or Freddie prior to April 1, 2009 to qualify for a HARP refinance.

The industry's four largest mortgage servicers all say they will be taking part in the revamped Home Affordable Refinance Program. Bank of America, Chase, Citigroup and Wells Fargo have each expressed their support of the program and the changes that will allow more underwater homeowners to refinance.

Government officials expect the program's revisions to expand its reach and increase competition for mortgage refinancing with an estimated 1 million homeowners to receive assistance under the new guidelines.

Q: Is the demand for homes increasing?

A: One recent survey, conducted by HousingPulse, does indeed show a rising demand for homes.

"Homebuyer demand appears to be intensifying, especially among lower-priced REO (bank-owned) properties," according to the survey report. "Time-on-market for move-in ready REOs was just 10.1 weeks in November, the lowest in 15 months. Time-on-market for damaged REOs was even lower at 9.0 weeks, also the lowest in 15 months."

The survey polled approximately 2,500 real estate agents nationwide to assess market trends surrounding homes sales.

Q: Are home sales on the rise?

A: The National Association of Realtors reported that pending home sales continued to rise in November, reaching their highest level in 19 months.

NARs index of signed sales contracts jumped 7.3 percent between October and November and is 5.9 percent above its level a year earlier. The last time the index was higher was in April 2010, as buyers rushed to beat the deadline for the homebuyer tax credit. Analysts say the results are likely to feed the view that there is a recovery going on in the housing market.

Q: Has the Federal Housing Administration re-instituted its anti-flipping rule?

A: The FHA has extended the temporary waiver of its property anti-flipping rule. FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days.

In 2010, the agency waived this regulation and later extended the waiver through 2011. This latest extension permits the use of FHA-insured financing for HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through Dec. 31, 2012.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.