Loan Modification Under the HARP Program

Frequently Asked Questions, Part I

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What Does Refinancing Mean Under the HARP Program?

Refinancing,under the Home Affordable Refinance Program (HARP), means getting a new loan to replace your existing loan. The major feature of the refinancing element is to allow the loan amount to exceed 80% but not more than 125% of your home's value.

Previously no new loan could be written that was higher than 80%, with the drop in housing prices this change should enable many to take advantage of the current low mortgage interest rates.

I am Underwater. I Owe More Than My House Is Worth. Will A Mortgage Refinance Under HARP Reduce What I Owe?

No. The objective of a refinance under HARP is to help homeowners get into more stable or more affordable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe.

When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

How Do I Know If I Qualify For A Payment Reduction Under The Plan?

In order to qualify for the Home Affordable Refinance Program (HARP), you must be able to show the following:

  • You are Current on your mortgage payments. You can't be more than 30 days late for the past 12 months.

  • Your Loan is Federally Guaranteed: which means you have a loan owned or guaranteed by Fannie Mae or Freddie Mac.

  • Payment Affordability: You have to be able to demonstrate that you can afford to pay the new loan. Your debt ratio should be between 38% and 52%. To find out use our DTI this calculator.

Are There Any Other Qualifications?

Yes. Under the U.S. Government plan you must also:

  1. You occupy your house as your primary residence;
  2. Your current monthly mortgage payment must be more than 38% of your gross (pre-tax) monthly income; (This is known as the debt to income ratio or DTI.)
  3. Your loan is guaranteed by Fannie Mae or Freddie Mac
  4. Your loan amount does not exceed $729,750, the current Fannie Mae and Freddie Mac loan limits, and
  5. At the time you apply, you are current on your mortgage payments ("Current" generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months; or, if you have had the loan for less than 12 months, you have never missed a payment).
  6. The amount you owe on your first mortgage does not exceed 125% of the current market value of your property;
  7. Your mortgage originated before Jan. 1, 2009.
  8. The refinance improves the long term affordability or stability of your loan.

Final eligibility will be determined by your mortgage lender.

Why Should I Act Now? Is There a Time Limit?

YES! The HARP program expires on June 10, 2011. Your refinance under HARP must have a new mortgage note date on or before that date.

What if I don't qualify under a U.S. Government Plan? Can I still apply for loand modification?

Yes. Depending on your lender, especially if it is a bank, it will likely have other options if you don't qualify under HARP or HAMP.

Will a HARP Refinance Lower My Monthly Payments?

Yes. The plan centers on the belief that struggling borrowers will stay in their homes - even as values decline sharply - as long as they can make their monthly payments. Homeowners whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.

Homeowners who are paying interest only, who have a low introductory rate that will increase in the future, or who face a balloon payment may not see their current payment go down if they refinance to a fixed rate and payment. These homeowners, however, could save a great deal of money by reducing the amount of interest you pay over the life of the loan.

For the rest of this article please go to Loan Modification Under the HARP Program, Part II

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Loan Modification Under HARP, Part I

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