Last October, President Barack Obama revealed the Home Affordable Refinance Program (HARP2) designed to help lower the interest rates for homeowners underwater who had diligently made their mortgage payments.
The purpose of the program was to reduce homeowners’ mortgage payments, which would hopefully reduce the number of short sales and foreclosures saturating the market.
As the program was laid out, the goal was to have a streamlined, low-cost, mortgage refinance program for those loans that were held by Fannie Mae and Freddie Mac and that met certain criteria.
As presented last October, there would be no appraisal and no income qualification as long as the homeowner had not missed a mortgage payment in the last six months.
In talking to lenders, many said that the announcement was made before consulting with lending institutions.
The program finally rolled out in mid-March with sketchy details.
We are finally beginning to ascertain the realities of the program.
Here are some details gleaned from talking with various lending institutions:
• You can expect to pay a higher, but competitive interest rate if you are refinancing under HARP2.
• The higher interest rate is being charged because of the greater perceived risk in refinancing these loans.
• An appraisal may or may not be needed depending on either the lending institution or Fannie Mae and Freddie Mac guidelines.
• The lending institutions that were contacted are requiring tax returns, income verification and a statement of net worth much like the requirements for obtaining a regular loan.
• Not all lenders are participating in the program as some still feel that there is too much uncertainty and the loans pose a significant risk.
• The majority of the lenders I talked to seem to have a degree of frustration with the process.
In addition, they seem to agree that the announcement of this program in October was premature with no details of the implementation of the HARP2 refinance plan being worked out before to the announcement.
So is it worthwhile to investigate HARP2?
It would seem so. If your interest rate is much greater than today’s low rates, you should definitely give it a shot.
For example, if you owe $200,000 on your home and can reduce your interest rate by 1.5 percent, you may be able to reduce your payment by almost $200 a month.
If you choose to move ahead, be patient with the process and work closely with your mortgage advisor to expedite the refinancing process.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.