The Home Affordable Refinance Program (HARP) has been in operation for a few years now, but previous efforts were disappointing at best. Recently, major changes were made to federal mortgage programs in order to help more homeowners find relief from their mortgage debts and avoid foreclosure.
A Change For The Better
A few program details are being changed and expanded as part of a Obama’s plan to resolve the mortgage and housing market recovery process. While refinancing has been an option that was sought sparingly in the past these changes seek to open it up as a solution to more homeowners, even those that may be considered underwater or delinquent. The most notable changes will be:
Abolish the current loan-to-value limit on homes for qualification— an underwater loan is one with a loan-to-value limit greater than 100% and the current limit is 125%, disqualifying anyone over that amount. The idea is to remove a set criteria and leave it up to the discretion of the lender, freeing up the chance for refinancing regardless of whether a home is considered underwater or not.
Remove or waive refinancing fees–the average refinancing transaction subjects the borrower to pay closing costs out of pocket on the new loan. This leaves out many people who cannot afford to pay these fees when attempting to lower monthly payments. Removing some of the closing costs should allow for more homeowners to consider refinancing as a viable option.
Continuing record low rates–rates as low as 2 percent can be found in some circumstances. Efforts are being made to ensure that rates remain as low as possible, especially for those who may be experiencing significant hardships. Low rates is the key to refinancing success, something the industry needs to experience for the next several months.