HARP program for underwater homeowners: Will the sequel be better than the original?

Most of the time, the sequel to a movie is never as good as the original. Recently the federal government announced that it was reviving the Home Ownership Refinancing Program (HARP) allowing homeowners who owe more their home is worth to refinance. Always the optimist, I feel that this program will be better than the original, if only because the original was such a dismal failure. Not to harp (no pun intended) about how bad the original program was, but I have read from a variety of different sources the success rate was around twenty percent. Based upon what I have witnessed firsthand, from speaking to many disillusioned homeowners, I wonder if the real number was not closer to ten percent.

Supposedly, the new improved HARP program will not have a loan to value (LTV) cap allowing more homeowners to qualify for the program. Under the old rules the maximum LTV was 125%. This means that if the property was valued at $200,000 the existing mortgage would need to be $250,000 or less. This program is for existing Fannie Mae or Freddie Mac mortgages that were originated before May 31, 2009, either owner occupied or rental properties.

One important fact to remember is that existing FHA mortgages may, in most cases, be refinanced without an appraisal and very reasonable guidelines on income etc. This applies to both owner occupied properties and homes that were converted to rentals. I am closing a loan this month where the homeowners filed bankruptcy two years ago and their home has dropped in value. They were convinced they were stuck with a six percent interest rate, but fortunately they listened to a relative who insisted they call me to check if their were any options. A borrower should never pay an upfront fee to look a potential refinance to see if it is viable.

Will keep you posted as I learn more. As always, your questions and comments are welcome.

Chip Allen

Crestline Mortgage Bankers

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