HARP Mortgages To The Rescue

November 23, 2009

A relatively unknown type of loan – the HARP mortgage – has been structured to help homeowners who are having a problem making their payments. Some are at the brink of foreclosure and losing their home. Home Affordable Refinance Program (HARP) loans are designed to help a specific type of homeowner – those who have diligently kept their mortgage payments current and up to date, but need a more affordable refinance loan. They have not been able to attain one because the value of their property has dropped, wiping out needed equity.

A HARP mortgage, available through June of next year, allows such a homeowner to refinance his current mortgage with a low-interest loan, even though the owner has minimal or no equity in his home. The program is intended to help families stay in their homes and supports a continuing high proportion of Americans who own their homes. In most cases, lenders require at least 20 percent equity in a property for a refinance mortgage. A HARP loan can be up to 125 percent of the home’s current market value. And it can be processed quicker, smoother and more cost-effectively than other refinance loans for those who qualify.

One hitch is that the mortgage being refinanced must be owned by Fannie Mae or Freddie Mac, the government sponsored enterprises that own most home mortgages. Check with your lender to determine your mortgage’s current owner. Also, the owner’s monthly payments must be current – no late payments of 30 days or more over the past 12 months. And the new mortgage loan must improve the borrower’s financial situation.

A HARP loan can potentially help nearly 5 million homeowners transition from an unaffordable mortgage to an affordable one. But they need to know such a loan is available. Check with your lender or broker for more details.

Posted in Lending, Real Estate