The federal government today expanded its Home Affordable Refinance Program so home owners who owe more than their homes are worth can refinance into lower interest rate loans — as long as their original mortgage was guaranteed or owned by Fannie Mae or Freddie Mac.
Since its start in March of 2009, HARP has helped 838,000 Fannie Mae and Freddie Mac borrowers refinance home loans worth 80% to 125% of the value of their homes. Now, there will be no upper limit on how much the refinanced mortgage can exceed your home’s value if you opt for a fixed-rate loan, a change the government hopes will result in twice as many HAMP refinances.
To refinance using HARP, you must:
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- You can’t have used the HARP program already (there is an exception for Fannie Mae loans refinanced under HARP from March through May, 2009).
- The amount you owe on your mortgage must be 80% or more than your home’s value (you can’t use this program if you have more than 20% equity in your home).
- You can’t have any late payments in the past six months and you can’t have more than one late payment in the past 12 months.
Home owners who meet those eligibility criteria can contact their existing lender, or any other lender offering HARP loans, to start the refinance process.
There’s no limit to how much your mortgage can be over your home’s current value if you refinance into a fixed-rate loan, but if your new loan is an adjustable-rate mortgage, you can’t refinance for more than 105% of the value of your home using HARP.
The cost to use HARP has also been lowered in two ways. First, you will not have to get a full appraisal if Fannie Mae or Freddie Mac can get an automated appraisal of your home. Second, loan fees that borrowers had been paying to use HARP to refinance into shorter-term mortgages have been eliminated.
Fannie Mae CEO Michael Williams said that while HARP is only one refinancing program, “it is a critical one for those home owners who may be underwater on their mortgage and facing difficult decisions during these tough economic times.”