In 2014, many homeowners will still be upside down or underwater in their mortgage loans. This means they’ll still owe more than their homes are worth in the current market. It’s also referred to as having negative equity. This condition will put refinancing out of reach for most homeowners, but not for all.
The government’s HARP refinancing program will enable some underwater homeowners to refinance their mortgage loans in 2014. Here’s what borrowers need to know about HARP requirements in 2014.
HARP: Home Affordable Refinance Program
HARP stands for the Home Affordable Refinance Program. This government program allows underwater homeowners to refinance their mortgages, as long as they’ve been current on their payments for the last 12 months. Additionally, the mortgage loan must be owned or guaranteed by either Fannie Mae or Freddie Mac, the two government-controlled corporations that buy and sell home loans in the secondary market.
Homeowners who meet these and other HARP requirements may be able to refinance their homes in 2014, even if they are upside down or underwater.
This program is managed by the Federal Housing Finance Agency (FHFA). This agency is responsible for establishing the HARP refinancing requirements for 2014. Working with the U.S. Department of Treasury, FHFA launched the program in 2009. The guidelines and parameters have been modified since the 2009 rollout. The current version is known as HARP 2.0.
Currently, HARP is one of the only refinancing options available for homeowners with little to no equity in their homes. The program allows such borrowers to refinance into a lower interest rate, thereby reducing the size of their mortgage payments and saving money over time. Since it was first introduced in 2009, more than 2.8 million homeowners have refinanced through the program.
Proposed changes, such as the inclusion of homeowners whose loans are not owned by Fannie or Freddie, could make 2014 a banner year for HARP refinancing.
Latest News: FHFA Educational Campaign and “HARP 3.0″
In September, the FHFA launched an educational campaign to inform homeowners about the basic eligibility requirements for the HARP program, and to increase program participation. According to the press release that announced the campaign:
“The campaign is designed to encourage homeowners who have been making their mortgage payments, but who owe more than their home is worth, to contact their current lender or any other mortgage lender offering HARP refinances to review their refinancing options.”
Many underwater (or nearly underwater) homeowners who are eligible for HARP refinancing don’t even know about the program. So FHFA is trying to get the word out to a larger audience, and to encourage additional research among homeowners.
As of right now, the program requirements for 2014 look to be the same as they were in 2013. But there have been proposals for a third version of the program (referred to as “HARP 3.0″ in the lending industry), and this version would offer refinancing options to homeowners whose loans are not owned or guaranteed by Fannie Mae or Freddie Mac.
But the proposal has yet to be approved. So for now, the program is still limited to homeowners who meet the basic eligibility requirements listed below.
Eligibility Requirements for Homeowners in 2014
You may be eligible for HARP refinancing in 2014 if you meet all of the following requirements:
- Your mortgage loan must be owned or guaranteed by one of the two government-sponsored enterprises, or GSEs: Fannie Mae or Freddie Mac.
- Your mortgage must have been sold to Fannie or Freddie on or before May 31, 2009. (Explanation: These two organizations purchase loans from the lenders that originate them, and then turn around and sell them to investors in the form of mortgage-backed securities, or MBS.)
- Your home loan must not have been previously refinanced under HARP. The one exception to this rule is for Fannie Mae loans that were refinanced through the program between March and May of 2009.
- Your current loan-to-value ratio, or LTV, must be greater than 80%. In other words, your current mortgage balance must be higher than 80% of your current property value. This is typically measured with a home appraisal, ordered by the lender.
- You must be current on your mortgage payments at the time you apply for HARP refinancing, with a good payment history over the last 12 months.
Note: These are the minimum requirements for HARP refinance in 2014. Meeting these guidelines does not automatically qualify you for the program. Ultimately, it will be up to the lender through which you apply. If you meet the basic eligibility requirements, you can apply through your current lender or mortgage servicer, or any other lender that is approved by Fannie Mae or Freddie Mac.
- If your home loan is currently owned by Freddie Mac, you can check your eligibility status here: http://www.freddiemac.com/avoidforeclosure/harp_eligibility.html
- If your mortgage is owned by Fannie Mae, use the following link to check for program eligibility: http://knowyouroptions.com/loanlookup
If you’re not sure who owns your loan, contact your mortgage company. They should be able to tell you. Then you can use the appropriate link above to see if you might be eligible for HARP refinancing in 2014.
The program is currently scheduled to end on December 31, 2015. The deadline has been extended in the past, and could be extended again in the future. Additional changes are also possible. For the most current HARP guidelines and requirements, visit MakingHomeAffordable.gov.