Get ready for ‘HARP 2.0’

guest commentary by Ethan Nobles writing on behalf of the Mortgage Bankers Association of Arkansas.He can be reached at [email protected]

On Nov. 15, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac announced new guidelines for  to the Home Affordable Refinance Program (HARP) in hopes of helping more struggling homeowners take advantage of lower interest rates and secure affordable mortgage payments.

The so-called “HARP 2.0” is an extension and expansion of the program that is a little over two years old and hasn’t helped as many home owners as expected. Indeed, HARP has helped less than 1 million homeowners since it was launched and that, in large part, is due to declining property values in a number of markets.

The original HARP required home owners to owe no more than 125% of what their homes were worth – a guideline that may have been generous when written, but has been viewed as overly harsh in some quarters due to dropping home values.

HARP 2.0 addresses that problem by waiving that requirement and putting some other measures in place that, in essence, require less money of borrowers and – in theory – streamlines the refinancing process.

Good news? Well, it could very well be great news for some people. However, officials are expecting a rush of borrowers seeking to take advantage of the program. To that end, it may be wise for qualified borrowers to prepare before seeking help through HARP 2.0 after the program is in place over the coming weeks.

Here’s the problem. The government expects around 7 million Americans to be eligible for help through HARP 2.0. Should even a slight percentage of those qualified borrowers start the refinancing process under the program, that means banks will be flooded with applications. In such situations, the applications that are complete and provide the necessary information will likely get priority.

So, how can one get ready to submit a successful application under HARP 2.0. guidelines? Here are a few tips:
• Are you current on your mortgage? The guidelines require borrowers to be current on their mortgages. That means the last six payments must have been on time with only one payment over 30-days late in the past year.

• Is your loan old enough? Only mortgages funded before June 1, 2009, are eligible. Grab your closing paperwork and look for the funding date to figure out if your loan is old enough to qualify.

• Make sure Fannie Mae or Freddie Mac backs your mortgage. HARP 2.0 is only available for loans guaranteed by those two government sponsored enterprises. To find out if you qualify along those lines, you can find your answer on the Internet by visiting this Fannie Mae site and this Freddie Mac site.

• Does your mortgage have lender-paid mortgage insurance (LPMI?) If so, you won’t be eligible for help through HARP 2.0. If your mortgage insurance is itemized – rather than built into your mortgage rate – then you do not have LPMI and are, therefore, eligible for HARP 2.0 help.

• Got paperwork? If you want to refinance through HARP, you’re going to need plenty of supporting documentation. Grab those pay stubs, W-2s, bank statements, drivers license and any other financial documentation you believe will be relevant.

Bear in mind that figuring out the ins and outs of HARP 2.0 can be made easier with the help of a local mortgage banker. They’re in the business of helping borrowers find the mortgage options that work best for individual home owners.