Finance

HARP Refinancing: A History and What you Need to Know

The Home Affordable Refinance Program (HARP) is a U.S. national program that started in 2009. The purpose of the program is to assist struggling homeowners refinance their mortgages. The following is a brief history of HARP and the way the program continues today.

The Crisis

Following the U.S. housing bubble burst in 2007, homeowners found themselves in a challenging situation. Many saw the worth of the houses fall near or even below the value of the mortgages. Since banks required a loan-to-value ratio of 80 percent or less, many homeowners weren’t permitted to refinance with lower rates of interest.

By way of instance, imagine a home was bought for $160,000 but its value fell to $100,000 with the declining market. Now assume that the homeowner still owes $120,000 on the mortgage. In this scenario, the loan-to-value ratio is 120%. If the homeowner wanted to refinance her mortgage, she would also have to pay for private mortgage insurance. If she wasn’t paying for private insurance, the additional cost could cancel out a lot of the benefits of refinancing, effectively prohibiting the homeowner out of refinancing their property.

Crisis Response

HARP was made in March 2009 to allow homeowners with loan-to-value ratios greater than 80 percent to refinance their mortgages. Originally only homeowners with ratios below 105% could be eligible, but this was later enlarged to 125%. In December 2011, the limit has been abolished, allowing any individuals with negative home equity and mortgages up to 30 years to refinance their mortgages.

Criteria

Homeowners necessary to fulfill several criteria to qualify for HARP. First, their mortgages necessary to be guaranteed by Freddie Mac and or Fannie Mae. Since these organizations do not directly take care of the general public, many homeowners weren’t aware their mortgages were connected to those companies. The homeowners also had to be present on their loan, with no late payments within a six-month interval. Lastly, the homeowners should have profited from the refinancing with a lower monthly payment or a more secure product.

Since many lenders were reluctant to refinance to homeowners with private insurance, HARP 2.0 was afterwards instituted. This allowed a homeowner to seek out a refinance from any lender. HARP 2.0 also allows refinancing for all occupancy types. This means HARP now comprises the key household, a secondary house, or a rental home.

Recent Developments

In 2012, President Barack Obama said he desired to implement HARP 3.0. According to the program, accountable homeowners would have the opportunity to save approximately $3,000 a year in their home mortgages. The program is also expected to expand eligibility requirements for HARP benefits to homeowners that aren’t connected to Freddie Mac or Fannie Mae. Though still discussed, the program for HARP 3.0 hasn’t passed as of the writing of the article in May 2014.

The Home Affordable Refinance Program (HARP) has supplied much-needed fiscal relief for tens of thousands of Americans. Individuals who have found the value of the home has declined may be eligible to take part in HARP. The refinancing program empowers homeowners to refinance an existing mortgage so that they can be given a stable and secure one.

Before beginning applying for refinancing through HARP, you must be conscious of the basic phrases and terms related to the program.  Now you understand the background of HARP refinancing, figure out if it is the ideal choice for you and your loved ones and check out all you will need to know below.

Closing Prices

Closing costs are the additional fees that borrowers must pay to be able to refinance a mortgage through HARP. You should know about the closing costs that a lender fees for refinancing a mortgage through HARP. If you realize that the closing prices exceed the savings you will enjoy, you might want to reevaluate refinancing your mortgage. People who have larger loan amounts will probably have the ability to reap the advantages of HARP. If you’re refinancing a mortgage with a value of $200,000 or not, you might just break even on closing costs and monthly payment savings.

Qualification

The HARP program lays out several conditions for eligibility. To be eligible to take part in HARP, you have to have a loan which has been owned or guaranteed by Fannie Mae or Freddie Mac before May 31, 2009. You’re current on your mortgage payments. The program enables barerowers to participate if they’ve been late on a payment once within the last year. Even if you’re not qualified for HARP, you may continue to qualify for a loan modification under the Home Affordable Modification Program (HAMP).

Interest Rate

The rate of interest refers to the loan fee that a lender charges for your mortgage. The rate of interest may vary on an yearly basis when you’ve got an adjustable-rate mortgage. Those with adjustable-rate mortgages regularly make the most of HARP so that they can refinance a mortgage into a fixed-rate mortgage. A fixed-rate mortgage includes a stable rate of interest, so homeowners don’t have to worry about obligations changing.

Primary

The principal refers to the whole amount that you owe for a mortgage. If you decide to refinance a mortgage, you should be conscious of any prepayment fees which may be connected to the new terms. A prepayment fee may be charged if you can cover the mortgage in full before the term of the loan.

Refinancing

Refinancing a mortgage means that you alter the sort of loan you have. You may convert a mortgage into another type which makes sense for your financial situation. Refinancing a mortgage will also affect other details of the mortgage, like the rate of interest or the principal balance owed.

Conclusion

If you’re interested in participating in HARP, you need to stop by the official government site, MakingHomeAffordable.gov, to find a lender which administers the program close to you. The Fannie Mae and Freddie Mac sites also feature tools that will assist you locate a HARP lender near you.

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