Helping homeowners dig out
The New York Times. (Dec. 18, 2011) By Vickie Elmer
WITH interest rates at historic lows, the expansion of a federal refinancing program could help more homeowners who owe more than their property is worth move out of higher-rate or adjustable loans into something more affordable and stable. The biggest change to the plan, called the Home Affordable Refinance Program ®, or HARP ®, raises the debt limit at which such borrowers can obtain a new mortgage. Those who owe more than 125 percent of their home's value are now eligible; the previous limit for many government programs was 97 percent to 125 percent. The percentage ratio is known as loan-to-value, or LTV. The government also reduced some fees.
While homeowners moving into fixed-rate mortgages will have no ceiling on their loan-to-value ratio, those who are sticking with an adjustable-rate mortgage will have a limit of 105 percent, said Jack Guttentag, a retired finance professor who now writes and runs a Web site called the Mortgage Professor. (ARMs are allowed if the initial rate is fixed for at least five years.) The expansion could more than double the number of people who have refinanced under the Home Affordable Refinance Program ®, which in the first two years has helped 900,000 borrowers, according to the Federal Housing Finance Agency. This could mean one million refinancings in 2012, and a similar number in 2013. The expanded program, dubbed HARP ® 2.0, could be ''a potential lifeline for people who are underwater,'' said Michael Bizenov, an executive vice president of Sterling National Bank, which has branches throughout New York and Long Island. But Mr. Bizenov and others say the program is getting a slow rollout.
You must meet three basic criteria to qualify for a HARP ® 2.0 refinancing:
1) Your mortgage must be owned by Fannie Mae or Freddie Mac, and must have originated on or before May 31, 2009. (Each has a Web site page that will check your address for eligibility.)
2) You must have been current on your mortgage for at least six straight months and have had at most one late payment in the last 12 months. If you are uncertain, check with your servicer or look on your statements for any late charges.
3) Your loan-to-value ratio must be above 80 percent, and you cannot have previously refinanced under HARP ®.
The next step is to visit your current lender's Web site or office to start the discussion. ''They're the first ones who could help you if you're eligible,'' said Erin Lantz, the director of the Zillow Mortgage Marketplace, which has a tool that lets owners see if they qualify. Some lenders started offering HARP ® 2.0 loans this month, while others will not begin until January. John Forlines, the vice president and chief credit officer for single-family product at Fannie Mae, said it would be fully rolled out by most lenders by mid-March.
Bank of America, one of the nation's largest mortgage lenders, has already instituted the lower pricing and fees on HARP ® 2.0 mortgages and will begin making the higher loan-to-value refinancing in January, said Terry Francisco, a senior vice president. Wells Fargo, another big lender, said it would be some time before it started the expanded program.Both Fannie Mae and Freddie Mac will waive many closing fees for owners refinancing into a 15- or 20-year HARP ® mortgage. This could save borrowers charges ranging from a quarter of a percentage point to two percentage points of the loan amount, though banks are free to set their own fees.But going to a 15- or 20-year mortgage from, say, a 30-year mortgage or an interest-only one in an effort to build equity faster could set off a closer review of your finances if your monthly payment increased by 20 percent or more, Mr. Forlines said.