With fixed mortgage rates setting new lows this week, refinancing has gained renewed momentum, making up 81 percent of all mortgage applications last week.
Nearly a third of refinancing activity centers on HARP, an acronym for a program which is fast becoming more familiar to homeowners who are “underwater” – or owe more in mortgages than the value of their homes.
Chances are if you are in negative equity, you junk mail is full of “HARP” refinancing offers. HARP stands for the government-sponsored Home Affordable Refinance Program. Earlier this year, federal loan processing systems were updated to launch the expanded “HARP 2.0”.
The soup-up HARP is for homeowners who are current on payments but are deeply “underwater” on mortgages. An earlier version of HARP targeted homeowners who owed up to 25 percent more on loans over their homes’ worth. That limit has now been removed.
With HARP 2.0, you get a completely new mortgage with new terms, interest rates and monthly payments.
However, the program is for borrowers whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac, the government-subsidized enterprises that cover 60 percent of all mortgages.
HARP may be an option if:
- You are “current” on your mortgage payments (“current” means you have not been 30 days or more late in the last six months and you were not more than one time 30 days late in the six-month period prior to the last six months)
- Your home value has decreased
- You have limited equity or your first mortgage exceeds the current market value of the home (i.e., your loan-to-value ratio must be > 80% to be eligible)
- Your loan is owned or guaranteed by Fannie Mae or Freddie Mac. Check the Fannie Mae Loan Look-up tool.
- Your loan was acquired by Fannie Mae or Freddie Mac on or before May 31, 2009 (this date can be found in the Loan Look-up results)
See Fannie Mae’s Knowyouroptions.com section on HARP.