Obama Recently Announced Changes to the Home Affordable Refinance Program

Widely anticipated changes to the Home Affordable Refinance Program (HARP) were announced on Monday, October 24,2011.

The two big questions are who will benefit and will the program work. The program has helped only a fraction of the homeowners that the administration had hoped for. By easing eligibility rules, the administration hopes 1 million more homeowners will qualify for its refinancing program.

A Roadmap of the initiative is as follows:

What is the Home Affordable Refinance Program, or HARP?
This program was started in 2009 to allow homeowners to refinance at lower rates. It was designed to allow borrowers to refinance their homes at lower rates without having at least 20% equity in the home. Few homeowners have been able to qualify due to being in a "negative equity situation". The administration hoped that the program would help  4 to 5 million refinance their homes, but in reality only about 900,000 homeowners have been able to take advantage of this program.

Why the lack of participation?
The program was limited to those borrowers whose home values have dropped no more than 25 percent below what is owed. Most of the hard hit areas have had a loss severity in excess of 50 percent. Also some did not want to incurr the refinance fees with the threat of looming continual downward price pressure on our housing market.

What changes are going to take place to allow more people to take advantage of this program?
The home owner's eligibility will no longer be limited by the loss severity or depreciation realized. The refinancing fees have been reduced dramatically so the cost of refinancing will reduced. The program will also extend through 2013.

Who is eligible?
Those whose loans are owned or backed by the two big  GSEs  Fannie Mae or Freddie Mac.To qualify for refinancing, a loan must have been sold to Fannie and Freddie before June 2009. Homeowners must be current on their loan. One late payment during the last six months will disqualify the homeowner.

Who will benefit the most?
Arizona, California, Nevada, and Florida

When will it begin?
Fannie and Freddie will issue the full details of the plan to lenders and servicers on Nov. 15, per the administration.

This program will do nothing to help the 6 million homeowners behind on their mortgage payments.

If you would like more information concerning your home value or to discuss how this plan can apply to your situation please feel free to contact us today. 623.536.1111

Source: “A Guide to Administration’s New Mortgage-Refi Plan,” The Associated Press (Oct. 24, 2011)