Once again there is excitement in the mortgage industry because of the new HARP 2.0 guidelines which were released on November 15, 2011. For the most part the original HARP which was passed in 2009 as the Making Home Affordable plan or the Obama Refi plan has been a failure. Very few people were able to qualify for the program and those who did qualify were only able to refinance at a lower rate and did not see the actual principal balance of their loan reduced.
The newest Harp guidelines will allow more people to qualify since the loan to value limit was eliminated. The old guidelines left millions of homeowners out due to loan to value restrictions of 105%-125%. There are no loan to value restrictions with the new HARP on 30 year fixed loans.
As before, the HARP program was not intended to help homeowners delay or avoid foreclosure. If you are behind on payments you will not be eligible for a HARP refinance. Your home loan must be paid on-time for the prior 6 months, and at least 11 of the most recent 12 months in order to refinance with HARP. Additionally, your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009 and if you refinanced under the old HARP you cannot use it again - only one HARP refinance per mortgage is allowed.
Another drawback that remains with the newest HARP is that only homeowners with Fannie Mae or Freddie Mac backed mortgages are eligible. Non-conforming loans such as jumbo mortgages as well as FHA and USDA mortgages are considered ineligible for HARP.
The biggest question remains. If a homeowner is upside down on their mortgage, do they really want to refinance an under water loan knowing that it may take 5-10 years to recover the lost equity? For some homeowners with jumbo mortgages in California, Nevada, Arizona and Florida it is not uncommon to be several hundred thousand dollars upside down. Situations such as this appear to have no viable solution and many of these homeowners are being told to just walk away.
As a matter of fact, these upside down jumbo mortgages have become the area of greatest risk for most lenders. Four out of the top ten lenders in the country are now proactively contacting these borrowers to encourage them not to walk away. These lenders are actually showing their concern about these mortgages and this has opened a window of opportunity for jumbo mortgage payors who are upside down.
With the help of creative 3rd party investors, jumbo mortgage borrowers who are open to creative problem solving are escaping their upside down mortgages and refinancing at 80% loan to current value. The process is fairly simple but suprisingly most refinancing lenders are unaware of the solution and turn away upside down jumbo refinances and the large commissions they can pay.
Mortgage brokers who are partnering with the same 3rd party investors and offering this solution to their clients are enjoying a great deal of success and a huge boost to their business.