Update: HARP expires December 31, 2018.
The Federal Housing Finance Agency has extended two programs, HARP and HAMP, meant to help struggling homeowners in the aftermath of the 2008–09 housing crisis. They will now run through 2016.
Although the number of homeowners taking advantage of these programs has steadily decreased with the passage of time, if you’re home has lost value or you’re in danger of falling behind on your payment, these programs may help you.
The Home Affordable Refinance Program (HARP) is designed to help borrowers whose loans were acquired by Fannie Mae or Freddie Mac on or before May 31, 2009. If you obtained your mortgage around this time and your home is worth less than you owe, HARP can help you. The program is intended to get you into the lower rates currently available.
Millions have taken advantage of the program, but there are plenty of people still eligible. Federal Housing Finance Agency Director Mel Watt said over 600,000 people could still benefit. To put these numbers in some context, there are over 81,000 people in Florida and 31,000 Californians alone eligible for a HARP refinance.
That could also be a really low estimate. The 600,000 figure only accounts for those who could benefit from the program who have loan-to-value (LTV) ratios greater than 80%. Although not technically a HARP refinance based on the LTV ratio, clients that meet all the other requirements can do a streamline refinance through Fannie or Freddie. According to the Urban Institute, when you account for lower LTVs, that number is actually just shy of six million. A lot of people could be saving money.
If you lost value on your home, you can refinance even if your home is worth half of what you paid for it. For example, if your home is worth $50,000, but you owe $100,000, you qualify. This is true even if the property is your second residence or vacation home.
Unless you refinanced under an earlier version of the HARP program anytime from March-May 2009, you can only take advantage of this program once.
In order to be eligible for this government-sponsored program, you must be current on your mortgage payments, meaning you can only have one late payment in the last year and none in the last six months. You may still be eligible if you’ve had a bankruptcy in the past.
Home Affordable Modification Program (HAMP)
Sometimes in life, things happen that are beyond your control. Maybe you were laid off from your job, or a family member fell ill and you now have to pay off huge medical bills. There’s just not enough money left over to cover the mortgage payment.
If you’ve experienced a financial hardship and have fallen behind on your mortgage payment (or are in danger of doing so), the Home Affordable Modification Program (HAMP) may be a solution for you.
This program is available for loans insured by Fannie Mae and Freddie Mac. The goal of HAMP is to reduce your mortgage payment so that it’s no more than 31% of your pretax monthly income. This is accomplished in one of a few ways:
- Lowering your interest rate either temporarily or permanently
- Extending your term (e.g., 30 years to 40 years)
- Changing the loan type (e.g., fixed-rate loan to a step loan)
A step loan is a type of adjustable rate loan that allows a limited amount of rate adjustment over time. For example, if your interest rate was lowered below current market rates at the time of your modification to make the payment affordable, that rate stays fixed for five years. After that, your rate will be raised 1% per year for up to five years until your rate matches the market rates at the time of your modification.
Any amounts that are past due, like interest and escrow, may be added to the principal balance which is amortized over a new term.
In order to be eligible for the program, you have to meet certain requirements:
- Your loan must be backed by one of the insurers above
- The loan must have been closed on or before January 1, 2009
- Your property cannot have been condemned
- You owe no more than $729,750 on a primary residence (higher limits for multiunit rental properties)
- You can’t have been convicted of mortgage or real estate fraud in the last 10 years
For more information, check out the HAMP website or contact your mortgage servicer.
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