Obama Administration Announces Harp Part Deux

Thanks to pressure from the Obama Administration

, struggling homeowners who are underwater on their mortgages have more government help on the way. The Home Affordable Refinance Program (HARP) which was designed to help lenders refinance millions of mortgages has been mostly a failure; less than a million made it through the process; and of those the vast majority were barely underwater, if at all. But the program is now gaining new teeth to help more people stay in their homes.

HARP is being extended another two years through December 31, 2013 and is available for refinance of Fannie Mae loans only. Not sure if your mortgage is owned by Fannie Mae? It is easy to find out by getting in touch with Fannie Mae website and loanlookup service to find out.

According to the President, the goal for HARP is "to provide access to low cost refinancing for responsible homeowners suffering from falling home prices." Although the details of the enhanced HARP will not be released until November 15, 2011, we expect that there will be fewer fees and less required documentation.

For example, it is expected that homeowners will need only proof of employment (and not verification of income strength) as a criteria for writing the loan. The reasoning is that if a borrower who is managing to make their payments at a higher interest rate will be even more able to do so at a lower payment, despite whatever is happening to their income due to the economy and slow job market.

Mortgage Refinances At 125% LTV Or Higher

What makes HARP unique is that it is the only refinance program that allows borrowers who owe more than their home is worth to take advantage of today's low interest rates. Current guidelines allowed homeowners to refinance up to 125% of the value of their home, but the new guidelines are expected to go even higher. Since 2005 many homeowners have suffered a loss in home value of 40 to 50% or more so even at 125% loan to value, they could not get relief through HARP. The new rules will open the door for many of these consumers.

HARP Remains Voluntary For Lenders

No matter how loose the government makes the HARP guidelines, participation in the program by lenders and mortgage insurance companies remains voluntary. If adoption by these two groups remains low, homeowners may continue to struggle to access the relief being offered. The more risk that the government is willing to transfer from the lenders and insurers to Fannie Mae and the other quasi-government mortgage agencies, the more likely there will be strong results from the enhanced HARP.

Once more specifics are known about the enhanced HARP, you can rely upon our updates to boil down all the mumbo jumbo into easy to read bite size chunks.

by: Nathan Randall

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