On October 25th, President Obama visited Nevada, one of the hardest hit foreclosure areas in the United States, and announced changes in the HARP program to help more homeowners who are underwater on their mortgage. Based on calculations from The Federal Housing Finance Administration an “estimated an additional 1 million people would qualify. Moody’s Analytics say the figure could be as high as 1.6 million.” and potentially could help 1 in 5 Californians that are underwater on their mortgage.
The HARP program has been around for awhile but one of the biggest limiting factors regarding its application is the loan to home value ratio could not be greater than 125%. In other words as long as your home only lost 25% of its value in the last 4 years you could qualify. Obviously, many home owners have lost more than 25% and some took out second mortgages that decreased their value up to 50%. With the revised guidelines, there is no loan-to-value ratio limit.
To qualify for the program you must meet three basic requirements:
- You must be current on your mortgage and have not been over 30 days late in the last year.
- Your loan must have been initiated prior to May 31st, 2009
- Your loan must be backed by Fannie Mae or Freddie Mac
The biggest challenge to the program for Bay Area homeowners is few of the mortgages made prior to 2009 were backed by Fannie Mae and Freddie Mac. You can determine whether or not your loan(s) is owned by Fannie Mae or owned by Freddie Mac by entering your loan account number on these web sites. Also recognize this must be your primary residence and the program only replies to senior liens not home equity lines or second mortgages. Also, recently maximum loan limits for the Bay Area were reduced from $729,750 to $629,500. There are efforts to revert this back to the higher limits but the bill currently faces the House of Representatives and many do not believe it will pass. This means your first loan can not exceed $629,500. There are also alternative programs if your home is not owned by Fannie Mae or Freddie Mac to refinance or reduce your monthly house payments.
Also, items to consider when refinancing any loan. You want to protect yourself by maintaining a non-recourse loan if possible. Also make sure you understand the cost of refinancing any loan verses the benefit. Finally, if you are behind on your mortgage and have exhausted all possible solutions to refinancing current loan(s) you may want to consider short selling the home to avoid foreclosure. If you want to learn more about short sales or want to discuss your options with no obligation or cost contact me.