The most ambitious federal mortgage program to date aimed at millions of underwater homeowners is poised to take off in the coming weeks, yet some key issues could hinder borrowers’ participation. One of them involves something most owners know nothing about: Who was your mortgage insurer on your underwater loan?
Though it was announced by the Obama administration late last year, the so-called “HARP 2.0” – the second version of the Home Affordable Refinance Program – will only hit full stride around the middle of this month, when Fannie Mae and Freddie Mac finish tweaking their automated underwriting systems to accept applications, and lenders and mortgage insurance companies start handling large volumes of requests.
The revisions are crucial for owners who have outstanding mortgage balances in excess of 125 percent of the current resale values of their homes. Under the second version of HARP, there is no upper limit on permissible loan-to-value ratios (LTVs). You can owe twice or even three times the value of your home and still qualify for a refinancing at today’s low interest rates. The earlier version imposed a limit of 125 percent, which cut out millions of the hardest-hit victims of the real estate bust.
The latest HARP also comes with streamlined underwriting – no requirement for physical appraisals in many cases, speedy processing and elimination of some of the deal-breaker fees imposed by Fannie Mae and Freddie Mac in recent years.
The objective, federal officials say, is to get it right this time around by removing the previous obstacles to widespread participation by lenders and severely underwater borrowers. Industry studies estimate that as many as 6.9 million loans could fit the broad requirements for refinancing, but that far fewer – somewhere around 2 million borrowers – are likely to qualify on all the detailed eligibility criteria.
Among the key rules:
• Only loans owned or guaranteed by Fannie Mae and Freddie Mac are eligible. Underwater borrowers who have FHA, VA or other types of mortgages are not. Both www.fanniemae.com and www.freddiemac.com offer “look up” features that tell you whether they own your loan.
• Your mortgage must have been purchased or securitized by either company no later than May 31, 2009, and must have an LTV ratio in excess of 80 percent.
• You must be current on your loan with no 30-day late payments during the six months preceding application and no more than one late payment during the last 12 months.