The federal government recently threw a lifeline to homeowners underwater with their current mortgages. Thanks to new changes to the Home Affordable Refinance Program (HARP) guidelines, more homeowners can refinance at today’s lower rates—even if their homes have declined in value. That’s because new HARP guidelines enable homeowners to refinance with no LTV limits, depending on the loan they choose. So homeowners will be able to improve cash flow, pay off their mortgages faster and have more confidence to become homebuyers again. HARP works not only with primary residences, but also with second homes and investment properties (including condominiums).
The Home Affordable Refinance Program was established in 2009 to help homeowners who have demonstrated a good payment history, but who might not otherwise qualify for refinancing because of declining home values. HARP helps these homeowners refinance into new, more affordable and stable mortgages. Original program guidelines capped LTVs at 125 percent for fixed rate and 105 percent for adjustable rate loans. While the ARM cap remains the same, there’s no longer an LTV limit for fixed rate mortgages of 30 years or less. (LTV for fixed rate loans with terms greater than 30 years and up to 40 years is capped at 105 percent.) And that’s especially good news for homeowners and real estate professionals in states that were hardest hit by declining home values, such as Arizona, California, Florida and Nevada.
With mortgage interest rates at their lowest levels in decades, many homeowners will be able to reduce their interest rate and monthly payments, pay off their loans faster by shortening loan terms and be back in the market to buy—whether it’s to move up or invest. No private mortgage insurance is required if it wasn’t necessary for the original loan. And no income documentation is necessary.
To qualify for HARP, a loan must have been originated before May 31, 2009 and be owned or guaranteed by Fannie Mae or Freddie Mac. The loan amount can’t exceed the conforming loan limits for the area where the property is located. The loan must be current and the borrower(s) must have established acceptable payment history (in other words, no late payments in the last six months and no more than one late payment in the last 12 months). And the property can’t have been refinanced before under HARP.
To make the ‘new and improved’ HARP available to as many homeowners as possible, Citi is broadly expanding its customer education and outreach programs. Real estate professionals can direct their clients to www.citimortgage.com for more information about HARP and to apply.
HARP was originally designed to help responsible homeowners eliminate the stress of being underwater with their mortgages. And now, the program has been updated to help homeowners participate in a once-in-a-lifetime low rate opportunity. For homeowners who feel stuck with their current mortgage obligations, HARP is a new way to bring them back to the home buying market.
For real estate professionals, that makes HARP music to their ears.
Carol Toren is Senior Vice President; Senior Director, Direct to Consumer, Citi.