Program to Help Underwater Homeowners Extended


Great news for homeowners!


On April 11, 2013, The Federal Housing Finance Agency announced that it will be extending the Home Affordable Refinance Program (HARP) for an additional two years (until December 2015). 


HARP is an important federal program designed to protect homeowners by allowing them to refinance when they would otherwise be ineligible.  The program was implemented in 2009 as part of the Making Home Affordable program, which was itself part of the federal government’s response to the housing crisis.  During the crisis, many people saw the value of their homes drop to the point where their homes were worth less than the amount they owed on their mortgage (commonly called homes which are “underwater”).  Although interest rates eventually dropped, many of these homeowners had difficulty refinancing because, as a general rule, lenders require homeowners to have what’s called a Loan-to-Value ratio of 80 or less in order to refinance.  LTV is a simple formula lenders use to compare what you owe on your home to how much it’s worth on the market. 


The LTV is easy to calculate: simply divide the mortgage amount by the value of your home.  For instance, if your mortgage is $100,000 and your home is worth $80,000, then your LTV would be as follows: 


100,000 ÷ 80,000 = 1.25 


Before HARP, a person with an LTV of 1.25 would have difficulty refinancing without obtaining expensive mortgage insurance.  HARP, however, is designed to allow these homeowners to take advantage of low interest rates even if they are underwater. 


Homeowners who are underwater with their homes should check to see if they meet the following HARP eligibility criteria: 


1)       Loans must have an LTV of 80 points or greater. 

2)       Your mortgage must be owned by Fannie Mae or Freddie Mac (check their websites to see if your mortgage was sold to one of these government-backed agencies). 

3)       No late mortgage payments within the past six months, and no more than 1 late payment within the past 12 months. 


If you are underwater on your home and you meet the above criteria, it may be worth your time to talk to your lender about refinancing under HARP.

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