The new plan by the government to help underwater homeowners was in the news today. Hopefully this plan will help some of the 1 in 20 homeowners on Long Island who have no equity in their homes. Homeowners will now be able to refinance a first mortgage – no matter how far the value of the home has dropped, enabling them to take advantage of the historically low interest rates available now. With average, 30-year fixed rate mortgages still hovering near 4%, there are more than a million homeowners on Long Island and nationwide who stand to benefit from the program overhaul. It is estimated that the average borrower would have their annual mortgage payments reduced by $2500.
The “devil is in the details” – but so far we know that the new rules include the following:
- Certain fees charged at closing are waived
- Your existing home loan must be guaranteed by Fannie Mae or Freddie Mac
- You must be current on your mortgage – no late payments within last 6 months, & no more than one payment late within last year
- Must be able to document income to support new payment
One important question is what happens if a borrower has a 2nd mortgage, such as an equity loan? Does the 2nd lien holder have to cooperate and accept the new primary mortgages on underwater properties?
Full details about the program will be released by November 15, 2011; and lenders are expected to be offering the program as of December 1, 2011.
The first step is to find out if your mortgage qualifies. Go to:
- Fannie Mae loan lookup : http://www.fanniemae.com/loanlookup/
- Freddie Mac loan lookup : https://ww3.freddiemac.com/corporate/
If your loan cannot be located on either of these two sites, your current mortgage is not backed by Fannie Mae or Freddie Mac, and is not HARP-eligible.
The FHFA’s official press release contains an FAQ section. In it, you’ll find minimum qualification standards, as well as information related to condominiums and to mortgage insurance. The HARP program is meant to help a wide group of homeowners, but each applicant’s situation is unique. For specific HARP questions, be sure to talk with a loan officer.
Really hope this helps homeowners who have been caught between a rock and a hard place. We’ll all be better off if this works.