HARP – the Home Affordable Refinance Program – is undergoing some much needed revisions to its eligibility criteria. Previously the program allowed some homeowners to refinance their existing mortgages up to 125% of the home’s value.
For example, let’s say you owe $200,000 on your mortgage. Due to the dramatic drop in home values across the Valley (generally), your home is now worth $140,000 (sadly, this is not unreasonable within the Phoenix market). Under the old HARP guidelines, the most you could refinance for would have been 125% of that $140K home value — that would be $175,000 (140K * 1.25 = 175K).
But you owe $200K, so a refi for $175K does you absolutely no good.
Enter the new guidelines. The 125% loan-to-value (LTV) limit has been lifted. Gone. Over. There is no LTV restriction under the new HARP guidelines.
This bodes well for Arizona homeowners.
I am not a lender. I’m a real estate broker.
I can answer some questions on the new HARP / Making Home Affordable program, but the person you really need to be talking to is a lender / loan officer.
Dan Green, a noted and highly regarded loan officer, has written the definitive article on the new HARP / Making Home Affordable eligibility requirements. Read that post. It is written in simple to understand terms, not the seemingly foreign language many lenders and real estate people toss about. It’s important to understand the program, and Dan explains it very well.
Keep in mind, not everyone will be eligible for a HARP refinance. But under the new guidelines, many more just may be able to refi that seriously underwater home…
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Whew! It’s about time for this program. Even though I don’t condone it, I can certainly understand why so many people have just walked away from their homes. To continue paying a $300,00.00 mortgage on a home valued at $150,000.00 is a hard pill to swallow. I hope this revised program will give those homeowners the resources to hang in there.
Ruth
Finally a program that rewards good behavior. I plan on refinancing 3 investment homes that I bought at the peak in 05 and 06 that are far, far underwater. I have paid the mortgages faithfully all these years despite a negative cash flow situation. With the refinance they will start to cash flow (barely!!). I have spoke with several others this past week and many are planning on taking advantage of this program. I think it will have a huge impact in Arizona even though the national press is already saying it will have an insignificant impact on housing.
I think it will be interesting to see how many people take advantage of this program and see it through to the end (pay their mortgage off completely). You still have to make the decision to be tied to a mortgage for many, many years that is upside down. For some people it is an ethical decision to not walk away from an upside down mortgage and for others it boils down to a logical, business decision.
My mortgage broker has 43 people on a list who will try to refinance under this program, he expects the banks to get crushed with applications.