Written By Charles Sells

In 2009 the Obama Administration and the Federal Government put in place a program called “Making Home Affordable” to assist homeowners with underwater mortgages (they owe more than the house is worth) A subset of that program is called the Home Assistance Refinance Program (HARP). Introduced by the Federal Housing Finance Agency (FHFA) and the Treasury Department, HARP lets borrowers with falling home values and limited options/access to refinance mortgages into more manageable payments and/or interest rates. To qualify for HARP a homeowner must meet certain criteria.

Who is Eligible?
To qualify for refinancing through HARP, the borrower must have taken out a mortgage that was sold to Fannie Mae or Freddie Mac no later than May 31, 2009. Borrowers must also be current on their mortgages and have no record of late payment within the last six months, and may only have one late payment maximum over the past 12-month period. Loans with loan-to-value ratios (LTVs) higher than 80% will continue to be eligible for HARP.

The Problem with HARP 1.0 is that many people in this situation have LTV ratios well in excess of 80% and/or do not have a loan sold to Fannie/Freddie. The original program assisted some 900,000 people, but there was still a massive need to increase the parameters and participants (Private Banks) to help more people.

The next phase, known as HARP 2.0, was implemented to pinpoint the barriers that were preventing certain people from refinancing.
HARP 2.0 Announced by the President, October 24, 2011, the Home Affordable Refinance Program has been updated allowing more homeowner’s to take advantage of the program.
• The program has been extended until December 31, 2013.
• The maximum Loan to Value (LTV) cap has been removed on home owners looking to refinance in to a fixed rate mortgage.
• However for homeowners looking to refinance in to an adjustable rate mortgage the maximum LTV is set at 105%.
• The appraisal process has been streamlined; in cases where an automated value can be determined, an appraisal would not be required.
• Each mortgage lender will enact its own schedule for implementing these enhancements. Lenders should receive instructions from Fannie Mae and Freddie Mac before November 15. Several lenders could begin taking in mortgage applications under the new enhancements by December 1. Other lenders will need extra time to accommodate the changes. Enhancements such as the ones affecting delivery of loans with LTVs above 125% should be in effect by the first quarter of 2012.
• With FHA refinancing fees set to be reduced, the number of HARP applications should increase even more. And it doesn’t end there: another phase of HARP may be in the works, pending several pieces of legislation designed to make refinance and equity building available to all responsible borrowers.
More still needs to be done for the people falling through the cracks. People with LTV’s of 80% or less, good credit but with 2nd liens won’t qualify if they have loans with non GSE’s (BofA, Wells, Citi, Ally) and while these non GSE’s are participating in the HARP 2.0 program, each bank has its own standards of qualification with debt to income rations, requiring manual appraisals, PMI disqualifications and a host of other reasons to deny…the process can be daunting, intimidating, and confusing.