Refinance opportunity for some homeowners will be going away
If you are one of those people who bought your property in early 2007, paid top dollar and did not have a big down payment, then you might still be somewhat underwater in your mortgage if you have not found a way to refinance under HARP, the Home Affordable Modification Program.
HARP allows homeowners with loans closed prior to April 30, 2009, to refinance up to (generally) 105 percent loan-to-value, often with unlimited combined loan-to-value if there is a second mortgage in place. Although millions of these loans were closed over the last several years, and rising property values have put most homeowners back above water; some studies estimate that there are still millions of homeowners out there who could benefit from these programs.
Not only do HARP loans have an almost ridiculously generous loan-to-value rule, they are also much easier to qualify for. The borrower does have to show some ability to pay the loan, but debt to income ratios are much more flexible than a new conventional loan.
It is also speculated that the reason many homeowners have not taken advantage of HARP is because their loans were adjustable rates, and those have been very low the last eight to nine years.
What a lot of people do not realize is that in some cases, if the borrower has a second mortgage loan and refinances the loan under HARP, then he or she may have the entire balance of the second mortgage forgiven. This little known program is not available from every lender, but it was worked in as part of the bail out of some banks. I’ve seen it work spectacularly, but unfortunately not every lender participates. Citi and Bank of America were two of the main lenders who were participating.
But all good things must come to an end, and HARP loans are scheduled to go away at the end of this year. There is a very slight, but highly unlikely, possibility that they may be extended, but don’t count on it.
To qualify, your loan must be owned by either Freddie Mac or Fannie Mae and closed before April 30, 2009. Keep in mind that the owner of your loan is likely different than the servicer. If you send your payment to, say, Chase or Bank of America, then they probably do not own your loan, they only service the loan by collecting the payments. The quickest way to find out who owns your loan is to call your servicer and have them tell you if it is a Fannie, Freddie or a portfolio loan. A portfolio loan is held by a private investor group, often insurance companies or funds set up to hold mortgage backed securities.
If your loan is eligible for HARP, and you owe more than 80 percent loan-to-value, then you should investigate a HARP refi. Even if you have a low interest rate on an adjustable loan, then you need to consider that when that rate goes up you may be trapped in your loan because of the loan-to-value issue.
If this sounds like you, then talk to a good loan originator and explore your options, as there are going to be a lot of people waking up soon and finding they missed the window of opportunity.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.