Last fall, the Federal Housing Finance Agency (FHFA), which become the conservator of Fannie Mae and Freddie Mac back in 2008, made several key changes to the Obama Administration’s Home Affordable Refinance Program (HARP) in order to encourage more struggling homeowners to take advantage of it. According to a recent article in Inman News, the strategy has definitely paid off, as participation in the program has doubled year-over-year since its inception.
One of the major changes to the program is the retirement of a 125 percent loan-to-value cap that used to determine eligibility, as well as the elimination of many legal liabilities for lenders and risk-based fees that used to plague homeowners, particularly those who refinanced into shorter-term mortgages.
The positive results of these modifications speak for themselves, as HARP refinancing rose significantly from 25,475 in 2011 to 67,456 in May of 2012. Of those numbers, two thirds went to borrowers with LTVs (loan-to-value ratios) of 80 to 105 percent, and the remaining third went out to borrowers who were severely underwater. Underwater mortgages, in fact, seem to be benefiting most of all from the program, as more refinances were completed in the first five months of this year than in all of 2011 combined (rising from 59,991 to 78,273.)
There is more good news, too, as the article also reports that, “HARP refinancings accounted for 20 percent of all refinancings, the greatest proportion since the program’s inception in 2009. Since then, HARP has completed a total of 1.3 million refinancings, or about 11 percent of Fannie Mae and Freddie Mac loans refinanced during that period.”
If you’re interested in taking advantage of the HARP program must meet a few criteria. First off, your loans need to be owned or guaranteed by Fannie Mae or Freddie Mac and must have been sold to the GSE before May 31, 2009. Additionally, your loan-to-value ratio needs to be over 80 percent, you must be current on your mortgage payments, and you can’t have any late payments during in the six months leading up to your refinance (criteria is subject to change – contact a mortgage professional for more information). The program may well be a lifesaver for those who are either behind on their payments or deeply underwater, so if it sounds like the right decision, consult with the experts and do what’s best for your particular situation.
Read More: HARP refinancing update