Foreclosure Advice: Who Qualifies for HARP 2 Refinancing?

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The popularity of the Home Affordable Refinance Program (HARP) has been well documented in the media in recent months. Compared to the initial version, HARP 2 has been very successful, enabling thousands of “underwater” homeowners to refinance.

On November 15, 2011, Fannie Mae and Freddie Mac released updated guidelines that came to be known as HARP 2. The current HARP program is now scheduled to last through the end of 2013.

Perhaps the most significant change HARP 2 offers is the removal of what’s called a loan-to-value cap on fixed-rate mortgages.

What’s the Loan-To-Value Ratio? Why is it important?

The Loan-To-Value Ratio (LTV) is one criteria used by lenders to assess risk when deciding whether to approve a mortgage. The LTV is calculated by dividing the amount of the mortgage by the current appraised property value. For example, if you were trying to purchase a 400,000 property with $100,000 down, your LTV is calculated like this:

$300,000 mortgage loan amount / $400,000 appraised property value= 75% LTV

In some cases, a homeowner may owe more than the property is worth. For example, a property worth 400,000 that’s mortgaged for $420,000

$420,000 mortgage loan amount / $400,000 appraised property value= 105% LTV

A higher LTV typically means more risk, a higher cost loan, and possibly the requirement to purchase mortgage insurance of the LTV is higher than 80 percent.

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So, is there a loan-to-value cap with HARP 2?

The loan to value cap is different for fixed rate and adjustable rate mortgages:

– Fixed rate mortgages: The 125% LTV cap has been eliminated

– Adjustable rate mortgages are subject to LTV cap of 105%

– Loan terms longer than 30 years are subject to LTV cap of 105%

Here are a few of the criteria to qualify for a HARP 2 loan. Note that participating lender guidelines for approval will vary. If you have applied for HARP loan before and been turned down, go ahead and re-apply again. To qualify for a HARP 2.0 loan, you should:

  • Be current on monthly mortgage payments
  • Current is defined as having no late payments of 30 days or more in the past 12 months. Borrowers who have missed a payment during the past six months may have to wait until they meet these requirements before they apply.
  • Have a mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac.

How can you tell?

  • Check this Website to see if your mortgage is owned by Fannie Mae – http://www.fanniemae.com/loanlookup/
  • Have a mortgage that was purchased by Fannie or Freddie before May 31, 2009.
  • Note that May 31, 2009 is not the date the mortgage closed but the date it was “securitized,” or purchased, by Fannie or Freddie.
  • Not have previously refinanced with HARP
  • If you have previously refinanced with HARP 1.0, you cannot use HARP 2.0.
  • Current loan-to-value should not be more than 80 percent.
  • The LTV is calculated by dividing the amount of the mortgage by the current property value. See examples of LTV calculations below.
  • Not have an FHA loan
  • The Federal housing administration has a separate program called an FHA Streamline Refinance. Ginnie Mae is associated with FHA loans and does not participate in the HARP program.
  • Not have a USDA loan
  • USDA does allow for the refinance of current USDA Guaranteed or USDA Direct Mortgages
  • Not have a VA loan
  • The Interest Rate Reduction Refinancing Loan (IRRRL) offers current VA mortgage holders an excellent opportunity to take advantage of low interest rates

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About the Author: Check out our blog to get any more information on the market! http://www.westernbancorp.com/western-bancorp-introduces-your-california-mortgage-newsletter. Charles Warnock is Director of Digital Marketing for Western Bancorp in San Jose, CA. He writes often on content strategy, copy writing, interactive marketing, real estate and mortgage marketing.

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Copyright © 2013 Yuwanda Black for Foreclosure Business News. Legal Disclaimer: The information dispensed on this blog is not to be taken as legal advice; it is for general purposes only. Please consult a qualified professional (eg, attorney, accountant, real estate agent, etc.) — in your jurisdiction — before taking any action based on the information listed here.