Submerged Homeowners Get Badly-Needed Help With HARP

Written By Arman Zulhajar on Sunday, February 19, 2012 | 12:52 AM

By Lance Mohr

Under Obama's HARP or Home Affordable Refinance Program, "underwater" homeowners, who have continued paying their mortgages, can get the badly-needed relief they've been seeking. HARP has recently been extended to the end of 2013, so mortgage loans owned by Fannie Mae or Freddie Mac can be re-written for responsible homeowners, whose appraised value is less than what is owed. You don't need to use your current lender, so this can ease the stress associated with un-cooperative mortgage lenders, who have been unwilling to modify your mortgage loan.

It doesn't matter whether you have equity in your home, because HARP is designed to overcome this previous obstacle to refinancing. Lower interest rates can lower your monthly payment, or you can shorten the terms of your borrowing. This means you can get in a position to start accumulating some value in your home, despite downward pressure on home prices. Staying up-to-date on your payments is a pre-requisite.

It might be hard to believe that 90% of eligible homeowners don't take advantage of the HARP option, even though they qualify and it could change their financial future.

Homeowners who have tried to live up to their obligations are rewarded, since timely payments are required in the last 6 months, and you can't have more than one time in the past year, where a payment was made late. The modifications are available on "Freddie" or "Fannie"-backed loans and those made after May 31, 2009, require an eighty percent LTV. The 125% LTV ceiling was removed on fixed-rate loans, but the 105% LTV requirement remains, on adjustable borrowings. Sometimes, an appraisal isn't required.

Other requirements include that the property be your primary residence, it must be 1 to 4 units, and you need to have the ability to continue making your mortgage payments. Refinancing your mortgage loan under HARP, must help the stability and affordability of your mortgage. In other words, you can't be recently laid off and facing a possible default on your loan. You also can't refinance to end up with a higher monthly payment, when shortening your loan term.

Before you get your hopes up, it's important to realize whether your loan has been purchased through these government-backed lenders. You can't pursue these flexible modifications, if you don't make it past this first hurdle. You can find links on the Internet, which offer you a "look-up" option that doesn't cost anything. Going through a HARP processor is required, but you can't assume all modification offerings are handled by authorized underwriters.

Certain government-guaranteed loans aren't included in HARP eligibility, including loans for Veterans or those through the FHA and USDA. If you feel like you got "suckered" with above-market sale prices and above-market interest charges, due to bad timing, it's possible you might be an ideal candidate for this solution.

Be warned that nothing's free and you'll have to pay some charges for a re-appraisal, evaluation reviews or application processing. While HARP isn't the answer for certain debtors, it's estimated at least a million people could be helped. For "upside-down" borrowers, it could be the miracle they've been waiting for.

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