In what will be the first of many finance tips that we feature on Tuesdays, we thought we would preview some important changes to the H.A.R.P. (Home Affordable Refinance Program). President Obama announced that influential aspects of the original H.A.R.P. program would be readjusted with details expected to come out around November 15th. With more news on the horizon I thought we should touch base with Senior Loan officer of Summit Mortgage, Cathy Robin.
With full details yet to be announced, Cathy decided to start with what we do know, “Changes to the existing H.A.R.P. will affect those homeowner’s who owe more than their home is worth. Those who qualify will be able to take advantage of low interest rates or other refinancing benefits such as shortening the life of the mortgage from 30 years.” As far as what qualifications on who may qualify for the break, “From what we know today to take advantage of this program, the existing mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Borrowers must be current on their mortgage payments with no late payments in the past six months and no more than one late payment in the existing 12 months of the agreement. The program it self will be extended to 12/31/13.” For those wondering if your loan is owned or has been guaranteed by Fannie Mae or Fannie Mac you can simply follow this link. The website currently has a tool to answer this question by simply entering the address of your residence.
Making Home Affordable.gov emphasizes that the biggest change is the elimination of 125LTV ceiling. Cathy puts these terms into context, “Currently, an appraisal is completed and if the existing mortgage exceeds the appraisal more than 125%, the homeowner isn’t allowed to refinance. This is particularly true for those who are in condo’s and town homes. By eliminating the 125% ceiling, it’s hopeful that many will be able to refinance their mortgage into a lower interest rate.”
The initial intrigue for a majority of eligible borrowers is what their new reduced interest rate will look like. However, Cathy stresses that the exact rate has to be figured on a case by case scenario, “It’s impossible to predict what the average mortgage rate will be until the program goes into effect. Rates are primarily determined by the credit score of the borrower and the loan to value of the property. Those with lower credit scores will pay a higher interest rate. For example, if the borrower has a credit score above 740 and 95% loan to value, the interest rate is currently 4.375%. If the credit score drops to 680, the rate increases to 4.75%.”
Cathy promised to provide us with more details once they are announced and at that time we will have a call to action on how Cathy can help you benefit from this opportunity. Until then please visit makinghomeaffordable.gov for any further questions.