Soothing Sounds of HARP
American home-buyers found themselves in a tough position after the housing bubble burst in 2008. Many saw their home values drop substantially. They became trapped and unable to refinance their mortgages during a period of historically low interest rates. The Home Affordable Refinance Program (HARP) was created by the Federal Housing Finance Agency in March of 2009 to help these “underwater” borrowers refinance.
Benefits: The original HARP rules have been relaxed over the years, so millions of homeowners were (and still are) able to:
• Refinance regardless of how far their homes have fallen in value;
• Lower monthly payments, reduce interest rates, and lock-in fixed rates;
• Avoid the purchase of mortgage insurance unless it was on the original loan (if that’s the case, the existing insurance transfers);
• Refinance with whichever HARP lenders they choose.
• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae (even if you got your mortgage from a bank, there’s a good chance that one of these institutions actually owns your loan. Call 800-7Fannie or 800-Freddie to determine who owns your loan);
• The original loan date must be before June 1st, 2009 with no previous HARP refinancing;
• The homeowner must be current on mortgage payments without a history of late payments;
• No equity in your home is required to re-finance. Your loan-to-value (LTV) must be greater than 80% (to calculate your LTV, divide the amount of money you owe on your house by its value);
• Refinancing is permitted on all occupancy types: primary residence (owner-occupied), second home, or investment (rental) property. Condos and manufactured homes are also eligible;
• HARP refinancing (under current rules) is not for everyone. It does not include jumbo mortgages, sub-prime or Alt-A mortgages. Interest-only mortgages and balloon mortgages are a “maybe” (it depends on whether they are backed by Fannie Mae or Freddie Mac). FHA, USDA, and VA loans are also not eligible as they are covered under separate refinance programs.
Unless extended, the current deadline for a HARP loan refinance is December 31st, 2015. If you are looking to refinance, shop around, as closing costs and interest rates will vary by lending institution.
David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.