Underwater on Your Mortgage? You May Have Another Chance to Refinance for a Lower Payment

On October 24, 2011, President Obama announced changes to HARP (Homeowner Affordable Refinance Program) to allow more underwater homeowners to qualify for the benefit. This new program was dubbed HARP 2.0.

Each mortgage lender was allowed to set its own schedule for implementing the enhancements. For example, lenders needed to re-program their automated underwriting systems to accept the new more generous guidelines set by Fannie Mae and Freddie Mac.

The good news is that some lenders are now ready to go!

The most significant change is that there is no longer a maximum loan-to-value (LTV) cap for homeowners looking to refinance a fixed-rate loan. (The maximum LTV on adjustable rate mortgages is still 105%.) In laymen terms, this means that it no longer matters how underwater a mortgage is. As long as other guidelines are met, a borrower still has a shot at refinancing.

Here are the additional guidelines and enhancements:

  • The loan must be owned by Fannie Mae or Freddie Mac, which means it must be a conforming loan. This amount is generally $417,000 or under but can vary. Check https://www.fanniemae.com/singlefamily/loan-limits for the loan limits in your state.
  • The homeowner must have a source of income.
  • Loans must have been purchased by Fannie or Freddie before June 1, 2009.
  • The current mortgage must be up to date with no late payments in the past 12 months.
  • Payments on the new loan must be more affordable or more stable than on the existing loan.

The appraisal process has been streamlined and an automated value can be used to determine the value of the home.

Do You Qualify?

If you think that you may qualify for this new program, the next best step is to contact your current lender to see if they are offering the new program, or contact a mortgage broker to discuss your specific situation.

Additional Resources

The HARP Mortgage Program

White House Proposes Aid for Underwater Homeowners:

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