How To Refinance When Your Home Is Underwater

If you’ve been running into issues refinancing your mortgage the “conventional” way, here’s some good news – The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable (MHA), HARP aims to help Texas homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

I have written about MHA before, and think its a great tool to have if you (or someone you know) is just “stuck”.

Here are the 4 basic HARP criteria every borrower must meet:

1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your home must be a 1- to 4-unit property
3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac holds your mortgage, you can easily look it up on their website (http://www.fanniemae.com/loanlookup); Freddie’s is http://freddiemac.com/mymortgage.  If you don’t find your mortgage loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Lien holders other than first position must agree to remain in their  junior lien position, regardless of combined loan-to-value, so no subordinations.

There is a really good and thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

HARP is not the easiest thing in the world, so before diving head first into this, make sure to get with your loan officer…or with me.

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Tommy is a senior mortgage consultant with Envoy Mortgage. For a free mortgage consultation, you can email him at
tommy@tr-mg.com. You can also find him on Twitter at @RightMtgGuy.

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Tags: HARP, making home affordable, Underwater Mortgage | Category: Foreclosures, HARP |