Starting March 15th, a Federal program called the Home Affordable Refinance Program, or HARP, will allow some borrowers who are upside down in their home loans to qualify for refinancing. The federal government also announced expansion of its loan modification eligibility rules under HARP to help those borrowers who have been able to make their payments on loans backed by Fannie Mae or Freddie Mac, but have been blocked from refinancing due to overly strict lending criteria.
With the average interest rate on a 30-year mortgage dropping to 3.75 percent it creates a combination of low interest rates and low home prices. The result is hoped to be more people qualifying for loans due to loosened guidelines related to credit scores and debt ratios. A variety of loan modification programs have surfaced in the past few years to help those homeowners whose mortgage exceeds the equity in their homes. When successful, these programs have provided significant benefits. However, even though Federal officials have estimated the recent eligibility changes under HARP could provide a bit of relief for one million American households, that number only represents a fraction of the over 10 million mortgages currently underwater nationwide.
Even though the inability of the housing sector to bounce back has been a barrier to the financial security of many Americans, any new Federal program that eases loan eligibility requirements might help create an opportunity for some new buyers to realize the dream of home ownership for about the same price as rent as prospective buyers with credit scores of 660 might only be required to put 3.5 percent down and even those with credit scores below 600 could qualify for some loans.
Changes implemented under the Home Affordable Refinance Program by the Federal Housing Finance Agency (FHFA) include the following:
* Eliminating the 125% eligibility rule as to the limit that the financed amount can exceed the property's value. This will allow many American homes currently more than 125% underwater to qualify for refinancing.
* Streamline refinancing of mortgages that originated between the years 2004 and 2008, when the average 30-year rates were typically 5% or higher.
* Expanding the program so that more lending institutions to participate in the refinancing process.
HARP is another in a series of Making Home Affordable (MHA) programs created by the Housing and Urban Development Department (HUD) with the goal of stabilizing the housing market and boosting the economy through programs to help borrowers lower payments, reduce interest rates, get through unemployment, or exit home ownership gracefully and obtain relocation assistance.
