However, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

Even though home values have risen in many areas of the country, there still remains plenty of people with underwater mortgages – meaning they owe more on the mortgage than their home is worth.

“It’s between 13 and 17 percent nationwide according to Zillow, National Association of Realtors, housingwire.com and other sources,” says Linda Weathers, loan officer at Security National Mortgage Company in Alameda, Ca. “It was considerably more than that, but home values have come back in many areas. Obviously, areas that are more desirable have built equity back faster than those not so desirable.”

That means there are still many people out there who either haven’t tried to refinance, have tried and failed, or just don’t know where to turn.

“I’ve been working with distressed homeowners now for about seven years, pretty much since the crash,” Weathers says. “Homeowners do have options such as working with their current lender or another lender who is participating in HARP.”

HARP (Home Affordable Refinance Program) started in 2009 as a government-sponsored program for homeowners to refinance from their high-interest rates, underwater mortgages and declining home values. HARP 2.0 came around two years later to help an even broader spectrum of homeowners in trouble.

To use HARP, there are certain conditions that have to be met, Weathers says:

• The home is an owner-occupied, investment, or vacation home of one to four units.
• The loan is owned or guaranteed by Fannie Mae or Freddie Mac, and it was originated before June 1, 2009.
• At the time you apply for HARP, you are current on your mortgage payments.
• Must be more than 80 percent loan-to-value (LTV). Some lenders are refinancing up to 300 percent LTV.
• It is for your first lien, not a second mortgage.

HARP ineligible? Here are other options

Not everyone is qualified to get a HARP loan. Many people are hoping that the government comes up with a HARP 3.0 version that would include a lot more people, especially people that didn’t have a mortgage that originated with Fannie Mae or Freddie Mac, or who bought a house after the June 1, 2009 cut-off date.

“Right now, there are no (government) programs for them. But through their current lender, homeowners can attempt a loan modification, forbearance plans or settlement,” she says.

Here are descriptions of these other refinancing options:

Settlement – Some second lien lenders are doing this, including her mortgage company. It is s basically a short payoff and then closing of the loan, Weathers says.

Forbearance – This is when your mortgage payments are reduced or suspended for a period you and your lender agree to, according to Federal Trade Commission’s Consumer Information website.  At the end of that set time, you begin paying your regular mortgage along with a lump sum payment or additional partial payments for a number of months to bring the loan up to date.

Modification – This is a permanent change in one or more of the loan’s terms and results in a payment the borrower can afford, according to the U.S. Department of Housing and Development website. The government offers HAMP, the Home Affordable Modification Program, designed to offer struggling homeowners who are struggling to pay their mortgage, or are already behind on their payments, a chance to reduce their monthly payments by offering lenders financial incentives for approving loan modifications. FHA and VA both have modification programs for those underwater, Weathers says.

“They basically all do the same thing – reset the term to 30 years from the new refinance date and may reset the interest rate. If there was mortgage insurance on the original loan, that insurance will also be on the new loan,” she says.

Her advice to those who are still underwater but can’t refinance for one reason or another is to try very hard to keep affording your payments.

“Stay current and eventually, the value will be more than the loan balance. Then, depending what interest rates are doing, it might make sense to refinance or not. Worry more about paying your mortgage off than when you can refinance,” Weathers says.

It’s a tough road for many that don’t have an outlet for refinancing, says Ken Schiff, mortgage originator at OJ Mortgage in Tampa, Fla. He truly believes that there are many people that could be helped if HARP 3.0 would be established. In fact, he meets these people all the time when he sets up his booth at home shows in Florida to explain HARP and other refinancing options to underwater borrowers.

“I now have a database of 1,200 people that don’t qualify for HARP 2.0, and they are waiting for something different from the government to help them out,” he says.

No HARP 3.0 equals stalled economy

A new program is not only needed for those who are underwater and can’t get help anywhere else, but he says it is needed to stimulate the U.S. economy even more.

“If people can’t see an increase in the value of their homes, they can’t put their homes on the market. If you can’t have home sales, the housing market is stalled, and that affects everyone,” he says.

Housing prices have increased in some areas, especially the ones that had been so damaged in the first place such as in Florida.

“But prices are not burgeoning like they used to be. Housing is such a key factor in our economy. We need to put more pressure on the government to allow more people to refinance,” he says.

For those that he does help refinance, it’s a great relief to the borrowers to have lower payments and more money each month.

“There could be millions of people with an extra $400 or more a month in their pockets if they could refinance, and others who would be able to put their houses on the market if they weren’t underwater anymore,” he says. “That’s a big domino effect.”

The post HARP 2.0 & Underwater Mortgage Refinance Options first appeared on My Mortgage Insider.

Four Big Ideas to Make HARP 3.0 a Reality

HARP 3.0 could turn out to be the most helpful refinance program in history.

Now if it could only make its way through Congress.

This legislation, also known as S.249 or the Responsible Homeowner Refinancing Act of 2013, is still in committee after trying to make its way through Congress since early 2013.

Current HARP 3.0 Bill Missing Key Element

Even if this bill were signed into law, it would be missing a vital aspect that would keep millions from participating in HARP: it would not allow non-Fannie Mae and non-Freddie Mac loans to participate in the program.

So anyone with a jumbo loan, Alt-A, or Subprime, or any loan kept in a private banks’ portfolio, would still be locked out of refinancing.

Allowing these loans that are not owned by the government-sponsored enterprises, or GSEs, is essential to any successful HARP 3.0 program.

But Congress is not likely to pass such an allowance because of risk to the GSEs. Here are some ideas that would make sweeping HARP 3.0 legislation a real possibility.

Big Idea #1: Add a Funding Fee to HARP 3.0 Loans

It’s a major gamble for Fannie Mae and Freddie Mac to refinance loans they don’t already own. They’re already on the hook for loans they made in the past, but not for non-GSE loans.

That’s why a new HARP bill should allow non-GSE loans to participate, but require these loans to pay an upfront funding fee. This fee would pay for any increased loan defaults Fannie and Freddie would experience.

Government-backed loans already take this approach. Veteran’s Administration (VA) loans require a 2.15% upfront funding fee. Federal Housing Administration (FHA) loans require a 1.75% upfront fee.

If the same idea were implemented for non-GSE HARP loans, the fee could help fund an insurance pool that would pay for HARP 3.0 foreclosures. Mortgage insurance has been a proven method to offset risk for lenders for decades.

This fee could range anywhere from two to three percent of the loan amount and it could be rolled into the loan amount so it would not add to cash the borrower would need to bring to closing. If HARP 3.0 paid for itself, members of Congress could only look good by attaching their names to it.

Big Idea #2: HARP 3.0 Test Markets in 2024

What do corporations worldwide do when introducing a new product? They test it in certain markets.

If the product performs well in representative areas, it’s assumed it will work on a larger scale.

The same idea could be put into practice with HARP 3.0. The legislation could require tests in key areas, such as Phoenix, Arizona, Miami, Florida, and Los Angeles, California. The program would have to prove sustainable in these aspects:

• There are a manageable number of defaults
• The loan program breaks even or is profitable
• There is adequate participation
• Homeowners are successfully reducing their payments and getting into fixed-rate loans.

The idea of a test run has already been implemented in Oregon, with a program nicknamed the “Merkley Mortgage” after Senator Jeff Merkley (D-Ore.), who introduced the idea. This loan program offers a refinance to any homeowner, despite who owns their loan. It has already been expanded from just one county to three.

If Congress is willing, a HARP 3.0 test could follow the same pattern and could be rolled out nationwide, perhaps even in 2014.

Big Idea #3: Place Loan-to-value Limits on Non-GSE HARP 3.0 Loans

One way to limit risk of the new non-GSE loans added to Fannie and Freddie portfolios would be to set up loan-to-value limits.

For instance, if the loan-to-value limit were 150%, a homeowner who has a home worth $100,000 could refinance up to a $150,000 loan amount. But if the homeowner needed a $175,000 loan, they could not do the loan – yet.

Admittedly, this requirement would block the most severely underwater homeowners from participating. But the idea would be to remove the loan-to-value (LTV) limits after time. We saw this occur once already, when HARP 1.0 changed to HARP 2.0. The LTV limits were removed and many more homeowners became eligible.

And with property values increasing by double digits in many areas, LTV limits may not be as restrictive as they once were.

Big Idea #4: Set Up a Buyer Database to Quickly Sell HARP 3.0 Foreclosures

Inevitably, the HARP 3.0 program will produce extra foreclosures on the GSE’s books. But that shouldn’t deter Congress from offering the program. Fannie Mae already has a website dedicated to selling its foreclosed properties, called HomePath. Freddie Mac’s version is called HomeSteps.

Why not add a form to these websites where interested buyers could request updates as new properties become available? And, a marketing campaign could be launched to increase awareness of these discounted GSE properties.

The quicker the GSEs could get rid of foreclosed HARP 3.0 properties, the more attractive legislation might be to lawmakers.

Congress and Homeowners Would Benefit

It’s perfectly understandable that lawmakers are a bit anxious about HARP 3.0. After all, no one wants their name on a law that has the potential to cost taxpayers. Nor do we want a repeat of the recent housing crisis.

Yet HARP 3.0 could potentially help millions of homeowners get into fixed rate loans while lowering their payments. This would be a boon for the economy as billions of dollars would be redirected from mortgage payments to other spending and saving.

Tell your Representative

It’s fairly easy to write to your Representative and tell him or her your desire to see HARP 3.0 happen. Simply go to the House of Representatives website and enter your zip code. Then copy and paste the below message to the member of Congress who represents your area:

Message Subject:

Four Big Ideas to Help a HARP 3.0 Law Pass in 2014

Message:

Dear Representative (Rep’s last name):

I’m concerned because many homeowners in my area still can’t refinance with HARP because their loans are not owned by Fannie Mae or Freddie Mac.  Please consider sponsoring a bill that would allow the Home Affordable Refinance Program (HARP) to accept non-GSE loans. Here’s how we could make the program work:

1) Require a funding fee for non-GSE loans that would help pay for the program; 2) Roll out the new HARP rules in select markets until it proves to be a viable program; 3) Set temporary loan-to-value limits on non-GSE loans to limit risk; 4) Establish an awareness campaign and buyer database to quickly sell any additional foreclosures caused by the new HARP rules.

Sincerely,

(Your name here)

HARP 3.0 Could Happen in 2024

With enough input from the public and some good practical ways to make it happen, members of Congress could pass a HARP 3.0 law. With the right legislation, HARP 3.0 could make Congress and homeowners very happy in 2014.

The post Here’s How We Can Make HARP 3.0 Happen in 2024 first appeared on My Mortgage Insider.

Q: If my mortgage is not owned by Freddie Mac or Fannie Mae, can I still get into the HARP program?

I got into my home before everything went south in the job and housing markets and received a rate higher than is offered with HARP. But my loan isn’t a Fannie Mae or Freddie Mac loan. It kind of sucks knowing that I’m probably paying $300 more a month than I would have to if I could use this program.

—Ed K.

A: You have a great question, Ed – one that thousands of homeowners across the country are asking. And I wish I could answer it differently than I have to. However the rules state that your loan has to be owned by either Fannnie Mae or Freddie Mac to be eligible for the Home Affordable Refinance Program, or HARP.

However, that’s not to say that HARP rules will never change. In fact, opening up the program to everyone is one of the big changes I’m hoping for in 2014.

Instant help: Get a HARP-alternative program rate quote and see if you’re eligible.

This change to the program would be called HARP 3.0.

A little HARP history: HARP 1.0 allowed underwater homes to refinance, but only if the loan balance was at 125% or less of the home’s value. Then HARP 2.0, the current program, was rolled out. HARP 2.0 does not have a limit to how underwater the home can be. But with HARP 2.0, it still has to be a Fannie or Freddie loan.

What many in the industry, including me, are hoping for in 2014, is that HARP 3.0 will be rolled out. This program would allow countless underwater homeowners who don’t have a Fannie or Freddie loan to refinance into today’s rates.

Millions of homeowners in the last decade used home loans that did not comply with Fannie or Freddie guidelines. Some examples of popular loans back then were:

• Alt-A loans
• Subprime loans
• Stated Income and stated asset loans
• Washington Mutual option ARMs
• Wachovia and World Savings option ARMs
• Countrywide PayOption ARMs
• NINJA loans (No income, no job or assets)
• Some types of interest-only loans

Just about everyone who used one of these loans ended up with sever negative equity, because most of these loan types did not require a payment to the principal loan amount. Then when home values crashed, many homeowners quickly found that they owed more than double what their home was worth.

Instant help: If you’re not sure if you’re eligible for a HARP-alternative, call a knowledgeable expert to find out.

But not all of these homeowners defaulted on their loans. To this day, many are paying their loans faithfully, in hopes of some help. I gather, Ed, that this is your situation, and I applaud your perseverance when so many have defaulted on their home loans during the housing crisis.

Is HARP 3.0 coming soon?

What I can say is that many in the industry are pushing for the Federal Housing Finance Agency, or FHFA, the agency that oversees Fannie and Freddie, to change HARP and allow faithful homeowners like you to take advantage of the same benefits that Fannie and Freddie loan holders have enjoyed.

There are many feasible ways to make this happen, as I discuss in my article “Here’s How We Can Make HARP 3.0 Happen in 2014.” One real option is to roll out HARP 3.0 changes slowly, which could result in a program called HARP 2.1 or HARP 2.5.

However it might happen, I welcome any positive changes to the program so we can see HARP 3.0 become a reality before rates rise too much. I want to see people who opted for less-than-ideal loan terms upwards of 10 years ago finally see some mortgage relief, start building equity, and get into long term loan types. People like you, Ed, deserve an affordable home for years to come.

The post Can I Refinance with HARP if My Mortgage is not a Freddie or Fannie Loan? first appeared on My Mortgage Insider.

Fannie Mae and Freddie Mac announced new refinances requiring as little as 3% equity, effective December 13, 2014.

The news comes as a welcome surprise. Homeowners who refinanced or purchased a home after May 31, 2009 are not eligible to refinance with HARP. With today’s record low interest rates, the new 97% refinance program could help homeowners finally reduce their payments.

Many households have seen their property values rise, but are still suffering from low home equity. These new programs could make the difference and finally allow struggling homeowners to refi.

New 97% Refinance Rules

The new conventional 97 refinance rules will open up eligibility for many homeowners. There are two types of 97% LTV refinances, one offered from Fannie Mae, and one from Freddie Mac.

That doesn’t mean you have to go to these two agencies directly for the loan. They don’t issue loans themselves. Instead they write the rules used by the vast majority of lenders across the country. The new Fannie/Freddie programs make it possible for borrowers to receive this mortgage from most lenders.

Fannie Mae’s 97% LTV Refinance

The new Fannie Mae refinance rules allow a homeowner to have just 3% equity in their home. Prior to the change, lenders required a minimum of 5% equity for a refinance, but often wanted 10%.

But according to Fannie Mae’s research, there’s no significant difference in default rates between homeowners with 10% equity and those with only 3%. This is why Fannie Mae loosened guidelines. Today’s HARP ineligible applicants can qualify to reduce their payments if they meet these standards:

• The loan is owned by Fannie Mae, as determined by the Loan Lookup Tool or other verification.
• Maximum loan amount of 97% based on the home’s current appraised value.
• The property is the borrower’s primary residence
• The new loan is a fixed rate mortgage.
• The property is a one-unit single family home, condo, co-op, or PUD. Manufactured homes not permitted.
• A mortgage insurance (PMI) policy is attached to the new loan.

The lender takes care of opening a mortgage insurance policy for the loan. This could add monthly cost to the loan, but the overall payment could still be less than the current loan’s monthly cost. Plus, PMI is cancellable as soon as the loan balance reaches 78% of the home’s value.

Reduced PMI is available through Fannie Mae’s My Community Mortgage program. Borrowers must meet certain income guidelines for their area to qualify.

Freddie Mac 97% Refi: Home Possible Advantage

The primary advantage to Freddie Mac’s version of this refinance program is that the current loan does not have to be owned by Freddie Mac or Fannie Mae. Here are the guidelines:

• The property is a 1-unit home, condo or PUD.
• The new loan is a 15-, 20-, or 30-year fixed rate mortgage.
• No cash out is allowed.
• Non-Freddie Mac and -Fannie Mae loans permitted.
• Borrowers must be at or below income limits for their area.
• The current loan is not an FHA, VA, or USDA loan.
• The new loan amount is $417,000 or below.
• The current loan is not a HARP loan.

Home Possible Advantage eligible homeowners also qualify for reduced PMI. More homeowners can make refinancing pencil out. The bottom line is whether the new loan saves the borrower money each month or not. If it does, homeowners benefit.

Many homeowners lost value in the real estate crash, value that is now returning. While values are bouncing back, many still have too little equity for a refinance – until now. The new regulations will help homeowners who are not eligible for HARP nor a traditional refinance.

Differences Between HARP 2.0 and the New 97% Refinance

HARP rules state that homeowners who opened a mortgage on June 1, 2009 and later are not eligible. The new 3% equity refinance has no such rule.

Many people purchased or refinanced homes in 2010 when rates were near or above 5%. Rates have dropped dramatically since then, leaving many of these buyers without a refinance option.

Here are the ways the two programs differ:

Before the new 3% equity program, homeowners with less than 5-10% equity in their homes would need to apply for an FHA refinance. That loan comes with permanent, high-cost mortgage insurance.

With the new “mini-HARP 3.0” program, mortgage insurance is still required, but automatically drops off when the loan balance reaches 78% of the last appraised value. The new Fannie Mae conventional 97 rules allow for a more cost-effective refinance option than FHA.

Who Does the 97% LTV Refi Help?

The new HARP 3.0 alternative will not help everyone, but it will allow many HARP-ineligible owners to lower their payments. Here is a snapshot of homeowner profiles the new Fannie Mae and Freddie Mac programs are likely to help.

• Homeowners who purchased or refinanced after May 31, 2009.
• Homeowners who are not otherwise eligible for HARP 2.0.
• Moderate income families who do not have a Fannie Mae or Freddie Mac loan.
• Households who have seen their property value rise, but not quite enough for a standard refinance.

The new program comes just in time, while rates are at record low levels and are projected to stay that way for some time.

Apply for the conventional 97% “mini-HARP” Refinance

Homeowners who are ineligible under current HARP rules and previous refinance rules might now qualify.

The post HARP Alternative: Fannie Mae 97 LTV Refi & Freddie Mac Home Possible Advantage first appeared on My Mortgage Insider.

However, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

The Obama refinance is one of today’s most powerful tools available to you as an underwater homeowner. But there’s a lot of confusion around the program so let’s take it from square one.

I’ve Heard of the “Obama Refinance” but What is It?

What’s commonly known as the Obama refinance or Obama mortgage has an official name: the Home Affordable Refinance Program, or HARP.

(Disclaimer: This is not a government site or blog post. We aim to explain this government-sponsored program. Visit the official government site for more information on the Obama administration’s refinance initiatives.)

The most useful aspect of HARP is that you can refinance even though you owe more than your home is worth, or in other words, you’re underwater. Most lenders now allow your new HARP loan amount to be as much as double what your home is worth.

This is a refinance feature that has never been allowed prior to the HARP program.

Another useful feature of HARP is that you can refinance if you have some equity, but don’t have enough to refinance. In fact, anyone with a loan-to-value ratio of 81% or more can use the program (meaning your loan balance is 81%+ of your value.)

You can use HARP on your primary residence, investment properties, and even second homes

So how do I Qualify for the Obama Refinance?

Here are some requirements:

• Your loan must be owned by Fannie Mae or Freddie Mac. (To see if Fannie Mae owns your loan, go here. Check Freddie Mac here.
• Your loan has to have closed on or before May 31, 2009.
• Typically you can’t use HARP on the same property twice.
• You must have made your payments within 30 days of the due date for the past 12 months. (Some lenders allow you to have 1 payment that was 30+ days late if it was more than 6 months ago.)
• You have to have a decent credit score (usually 640-660+).

For more extensive program details and Q&A, see our HARP page.

Fannie and Freddie don’t own my Mortgage. Is there a Loan for That?

The Obama administration is pushing forward a refinance plan to help homeowners whose loans aren’t owned by Fannie Mae or Freddie Mac. The new program has gone by many names, from HARP 3.0 to #MyRefi to “A Better Bargain for Homeowners.” Unfortunately, it’s not available yet.

Many variations of a new HARP program have been introduced in Congress but none have passed or been signed into law. This is frustrating for the millions of homeowners who have Jumbo loans, option ARMs, Alt-A loans, subprime, or any other loan that wasn’t acceptable to Fannie or Freddie.

So will features of the Obama refinance program pass soon, or at all?

I have to admit that the jury is still out. There have been promising signs of an updated HARP program, such as the confirmation of Mel Watt as the new director of FHFA, the President Obama’s comments in an interview with Zillow last year, and a HARP 3.0 test currently available in Oregon. However, there is no timeline for when a new underwater home loan program will be available.

Still, don’t give up hope. Just small incremental changes to the Obama refinance program could mean big savings to homeowners who have been locked out of refinancing since the housing crisis began.

You can get involved. See our article on How to Make HARP 3 Happen.

Possible Changes if the Obama Refinance Plan is Implemented

If the current Administration gets its way, we could see big changes to the current HARP program.

HARP started out as a little-known and little-used refinance type in 2009 – you couldn’t refinance if you had a loan-to-value (LTV) of 125% or more. And many lenders wouldn’t allow anything over 105% LTV.

Then in 2012, HARP 2.0 was rolled out, which removed the LTV cap, and did away with the need for an appraisal in many cases. This is the current program, and has helped over 3 million homeowners to date.

A revised refinance plan could have these features:

• Any loan would be eligible, whether or not it’s owned by Fannie or Freddie.
• If you’ve used HARP once, you could use it again.
• It could remove the May 31, 2009 cutoff date so those who purchased or refinanced afterward could use HARP.
• Reduced income documentation requirements.
• Lower credit score requirements.

These are just some of the changes that could come about due to refinance initiatives the Obama administration is trying to push forward.

Can I Refinance Without a new Obama Refi Program?

Home values have risen as much as 25% over the past year in some areas of the country.

Why does that matter?

It means your value may have increased enough to consider a standard refinance, outside of special government-sponsored programs.

For instance, if you owe $200,000, and your value was $200,000 last year, your new value could be $240,000 now assuming 20% appreciation. That puts you in range to use a standard conventional refinance.

Even if your new loan amount is over 80% LTV and you have to have private mortgage insurance (PMI), you might find that your payment still drops.

And, you can cancel PMI when your loan amount drops to 80% of your current value.

How Do I Find Out if I Qualify for the Current HARP Program?

If you’ve been denied before, you could be approved this time around. While there are standard HARP rules, lenders impose their own rules and often make the program more restrictive. You could be approved just by inquiring at various lenders.

By completing this short online questionnaire that takes 60 seconds, you will be matched with lenders who will look at your situation on an individual basis and determine if you qualify.

You could be very surprised that you qualify, even without HARP program changes. It’s possible you could be just minutes away from finding out you can save money every month with a refinance.

The post Everything about the Obama Refinance Program and How to Qualify first appeared on My Mortgage Insider.

However, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

A HARP refinance is just one option. There are other ways to get help with your mortgage payments, but you might need to think outside the box.

Q: My wife and I are seriously upside down due to the economy. We paid $530,000 for our current home about 6 years ago right before the crash. Our home is now valued in the mid to upper 300,000’s. We are so upside down and I don’t see any relief anywhere.

We need to lower our mortgage payment badly. It is at $3,000 per month and our loan is not Fannie Mae or Freddie Mac so we DO NOT qualify for a HARP which is sooo disappointing in our situation. I will be retiring in less then 6 years and I have to have a better situation or we will have no choice but to walk away. I don’t see any other way at this point unless we can refinance at a lower rate that is more in line with today’s rates.

We have never missed a payment on our mortgage but we are seriously strapped and barely hang on all the time.

What are our options? There has to be something that can be done here and it doesn’t seem fair that we can’t be involved in a refinance with HARP just because of the type of loan. What do you suggest my friend?

–Bill

There are so many people in your situation right now. I think that’s why so many are calling for sweeping changes in HARP – often referred to as HARP 3.0. There is a bill in Congress now, but I would call it more like HARP 2.1 instead of HARP 3.0. This is because it reduces costs on HARP and would allow people to qualify without proving employment – but the program is still only available for loans owned by Fannie/Freddie (the GSEs). Also, it doesn’t look like this bill will pass.

Here are my suggestions at this point:

1. Contact your elected Representative and tell them that a sweeping bill needs to pass in Congress, allowing non-GSE loans to be eligible for HARP.

2. Explore MakingHomeAffordable.gov for programs you may qualify for. HARP is just one of the government programs available now. Here are a few examples:

• HAMP – This is a modification program that allows some to reduce their mortgage payments. Apply by contacting your servicer.
• UP – This program may allow you to suspends or reduces your monthly payment until you can find your next job.
• Hardest Hit Fund – This is special allocation to 18 states and the District of Columbia to assist homeowners who live in the areas hardest hit by the housing crisis. Your state may have special programs available. One example is a HARP 3.0-like program for Multnomah County, Oregon residents.

3. Call your existing servicer. Even if they don’t participate in any of these government programs, they may have modification programs of their own. Many servicers would rather reduce your principle or interest rate than deal with the foreclosure.

4. Rental markets are getting stronger. In the next 6 years before you retire, rent out the home at or close to your current mortgage payment. Once your payment is covered by the renter(s), you’re free to downsize your own housing payment.

5. If it’s a big home and you have extra space, think about remodeling part of the home into a mother in law unit. Then, rent out this portion of your home. If you don’t have money for the remodel, invite a (trusted and pre-screened) boarder to live in a spare room, family style.

6. Wait for values to come back, and sell or refinance at that time. Believe it or not, the housing market is on a rebound and many states are seeing double digit appreciation.

I know none of these are the quick-fix that HARP could offer. But, they are some ideas you can experiment with. With a little creativity and some luck, you may be able to get help with your mortgage payments even without HARP.

The post I Need Lower Mortgage Payments but I’m not HARP Refinance Eligible first appeared on My Mortgage Insider.

Additionally, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

The Home Affordable Refinance Program, or HARP has helped millions of underwater homeowners.

But millions more are not eligible because their loan is not owned by Fannie Mae or Freddie Mac.

Still others are not eligible for HARP because they

• have used HARP before on the same property
• closed their loan after May 31, 2009
• have more than one late mortgage payment in the last 12 months.

There are other refinance options available when you think outside the HARP box.

“Cash-in” Refinancing

Most homeowners have heard of a cash-out refinance. It allows those with equity in their homes to receive cash at closing.

A cash-in refinance is the opposite. The homeowner puts cash into the transaction to close the loan because they don’t have enough equity.

This type of loan doesn’t sound like a good deal on the surface, but it can work out in the homeowner’s favor.

Here’s how. Say you could save $350 per month by refinancing. But you are $10,000 short on equity and not HARP eligible. You could take $10,000 from another source to complete the refinance.

Once you have enough cash, a myriad of loan types are available. You are no longer stuck in the HARP-ineligible jail cell. Fannie Mae, Freddie Mac, FHA, and VA refinance types suddenly become real options for reducing your high mortgage interest rate.

Eligible Sources of Funds for a Non-HARP Cash-in Refi

The biggest hurdle with a cash-in refinance is where to get the cash. It might not be as hard as you think.

The funds could come from a number of sources.

A personal loan or line of credit

Local banks and credit unions offer personal lines of credit. These are not attached to your home but are unsecured loans meaning you don’t need an asset as collateral.

Just remember you’ll need enough income to qualify for the line of credit and refinance loan.

A current investment or savings account.

Do you have a savings account making a dismal one half of one percent interest per year? Why not make money by saving money on your monthly home payment instead?

Instead of making $50 per year in interest, you could be saving hundreds of dollars per month.

Sale of an asset like a car

Obviously you need a car to work. But many people have way too much equity tied up in a car. It might be worth it to sell the vehicle, buy a more modest one, and use the net proceeds to refinance. It’s a sacrifice, but one that will lower your bills and make you more financially healthy.

A gift from a relative

You can receive a cash gift to make up the gap between your loan and negative equity. It’s a lot like raising funds for down payment to buy a house. Gift funds can come from the following sources.

• A spouse, child, or legal dependent.
• Another relative who is related by blood, marriage, adoption, or legal guardianship
• A fiancé, fiancée, or domestic partner.

Be sure to follow the guidelines for gift funds as outlined here.

How a Cash-in Refi can Pay Off

While it may sound like you’re robbing Peter to pay Paul, the numbers can work out surprisingly in your favor.

Let’s look again at the scenario in which you could save $350 per month by coming up with $10,000.

You’re going to make just a fraction of that amount in interest each month by keeping the cash in savings.

Likewise, your monthly cost for a $10,000 unsecured line of credit would be much less than $350 per month. If you assume a payment of $100 per month for a small loan, your net savings is still $250 per month.

A refinance lowers the interest on your entire loan balance. You’re leveraging a small dollar amount to reduce interest on a very big loan. That reduces overall strain on your budget.

A cash-in refinance is definitely worth a back-of-the-napkin calculation to see if it pencils out.

If you can come up with the cash to make up your negative equity, one of the many non-HARP refinance options become available to you.

Non-HARP Cash-In Refinance Types

If you make up your negative equity with cash, here are your refinance options:

FHA Refinance

• Refinance up to 97.75% of the home’s current value with a standard FHA refinance.
• Can refinance a loan that is not eligible for HARP.

Check your FHA eligibility here.

VA Refinance

• Adequate military service required.
• Can refinance out of any loan type up to 100% of the home’s current value.

Conventional Fannie Mae or Freddie Mac Refinanance

• Need 3-5% equity or cash-in to refinance.
• Requires mortgage insurance.

Cash-in Refinance Benefits

If you’re not sure if you can make a cash-in refinance work, it’s a simple as getting a hold of a lender who can work the numbers out for you.

Once you have all the facts, see if the refinance will benefit you, or if you should wait for your home’s equity to go up enough to refinance without any cash.

The post Compelling Option for HARP Ineligible Homeowners: Cash-In Refi first appeared on My Mortgage Insider.

Dear Tim,

I would like to give you a “short synopsis” of where we are with our mortgage.  Wells Fargo is our lender, paying 7.5% interest rate, our home is worth around 160k but we still owe 188k, underwater.  We are unable to refinance because our credit is shot from balancing who we are going to pay this month.

We are current with our mortgage and have been for over a year.  I took a pay cut around 3 years ago, tried a few times for modification, unsuccessfully, because we “were current and not in imminent danger of foreclosure”.

Our mortgage is not Fannie or Freddie owned and we were also unable to be included in the mortgage settlement because we were told Wells Fargo didn’t own our loan but is the servicer.  I have contacted Wells Fargo upper management, my senator, attorney general, and alderman. I am usually passed along to someone else – HOPE, HAMP, making home affordable, etc.

I have been waiting since 2011 for some progress with HARP 3, with a folder FULL of correspondence back and forth with Wells Fargo about half a foot thick.  I am wondering since you ARE the mortgage “expert,” if there are ANY options for homeowners like us?

I believe around four of our neighbors’ homes are short-sales, two walked away within this past year and another next door to us is being foreclosed on.  We are struggling financially.  ANY advice, news, etc. I would sincerely appreciate it.  We have just about run out of options.

-Tracy

Hi Tracy,

Your story is all too common across the country. I’m sorry to say there aren’t many options right now. HARP is still only for Fannie/Freddie loans and there hasn’t been much progress on HARP 3.

But you are doing the right thing in keeping up with the mortgage payment at all costs. If any programs do arrive, they will only be for people who have made all their mortgage payments.

While there aren’t a lot of options, it’s not to say there zero options! Here are a couple ideas I had off hand:

1. You can use FHA to refinance up to 97.75% of your current value, even if you don’t have an FHA loan now. If your value does rise to 190k or so, this could be a real possibility. How did you determine your current value? It could be higher than you think. I would advise calling a local real estate agent to get their opinion. Typically they can give you a pretty good estimate of value for free, and you don’t have to spend hundreds of dollars on an appraisal. With all the short sales around you, it’s not helping your value, but you never know. Values have been increasing across the country, and you might be surprised.

2. If any owner on your home has military experience, you might be able to refinance with a VA cash-out loan up to 100% of current value. So as your home climbs toward your $188,000 value, this could be a real possibility.

3. My only other thought is hopefully your state will do something similar to what Oregon did – they rolled out their own HARP 3 program without Fannie/Freddie approval or Congress. It’s pretty incredible what they did. Oregon senator Jeff Merkley created a fund using federal Hardest Hit Funds that Congress allocated to states hardest hit by the housing crisis. What a great use of these funds. If other states would create similar HARP 3-like programs, we would see a lot fewer people in your position.

I would just encourage you to hold on and keep making your payment. I’m confident something will happen eventually, it’s just a matter of when.

The post We Are $30,000 Underwater and Not HARP Eligible. What Are Our Options? first appeared on My Mortgage Insider.

A program that looks very much like HARP 3.0 has been rolled out in the state of Oregon. Will the other 49 states follow this pioneer in offering underwater homeowners relief?

The “Merkley Mortgage” as it is commonly known, allows homeowners who owe more than their home is worth to refinance even if their loan is not owned by Fannie Mae and Freddie Mac. This program is now available in the entire state of Oregon, rolled out statewide earlier this year after being available in only three Oregon counties initially.

Removing the Fannie/Freddie requirement has kept millions nationwide from using the standard HARP 2.0 program. Simply too many have had no refinance options because they opened a subprime, Alt-A, or another portfolio loan during last decade’s loose lending spree. Oregon has changed all that, at least for their residents.

HARP 3.0 for Oregon residents only – for now

The official name of the program is Rebuilding American Homeownership Assistance Pilot Program, or RAHAPP. It was created by Oregon Senator Jeff Merkley, hence its nickname.

The loan program now allows homeowners to refinance if:

• Their property is in Oregon
• They are current on their mortgage
• They don’t own any other property
• They are underwater on their mortgage
• They can’t use HARP because their loan is not owned by Fannie Mae or Freddie Mac.

Homeowners can refinance into one of two options:

1. A 15-year fixed loan at 4.0% with an APR of 4.129%
2. A 30-year fixed loan at 5.0% with an APR of 5.077%

What a welcome relief to the many Oregon residents who were trapped in high-interest, predatory loans whipped up by banks in the 2000s.

Oregon first, the other 49 states next?

Senator Merkley had a brilliant idea: use funds allocated by the federal government, called Hardest Hit Funds. This money was set aside by Congress for states that experienced the greatest levels of housing depreciation.

So it begs the question, if Oregon can do it, why can’t other states that received Hardest Hit Fund (HHF) dollars roll out their own programs? Florida, California, and Arizona also received HHF money. It would be a logical next step if these states followed Oregon’s lead.

From there, if these programs are successful, we could see a national program available in all 50 states.

Congress needs proof HARP 3 will work

What better proof that a HARP 3 program is feasible than a real-world test in an entire state? If the Merkley Mortgage is profitable, or at least doesn’t lose money, it could be the proof that lawmakers need to pass a HARP 3 law.

And if four or five states implement successful programs, HARP 3 could be a slam dunk in Congress. We could even see a HARP 3 program in 2014.

Can you qualify for a program other than HARP 3?

Even though millions are waiting for HARP 3, many don’t know that they are eligible for the current program, HARP 2.0, or other programs. They could be saving money each month, because they were denied and have not tried again.

Values have risen upwards of 25% in some places during the past year. And with enough value, you don’t need HARP 3 to refinance. Here are some other options:

Conventional Refinance: Usually you need 15-20% equity to make a refinance worth it.

VA Cash Out Refinance: If you have military service, you don’t need any equity to refi.

Private Mortgage Insurance: Even if you obtain PMI, you can cancel it when your loan reaches 80% of the value.

These are just a few examples of loan types you can examine while waiting for HARP 3 to be implemented in all 50 states.

Qualify for the current HARP program

Many are eligible for HARP 2.0 but don’t it, and are patiently waiting for HARP 3.

The Fannie Mae and Freddie Mac lookup tools can be hard to use. Homeowners should contact a HARP-alternative lender and have them do the digging to see if their loan is owned by Fannie or Freddie.

If the loan is owned by one of these entities, the homeowner could be eligible for HARP right now.

The post HARP 3-like Mortgage Now Available in Oregon. Are the Other 49 States Next? first appeared on My Mortgage Insider.

If HARP 3.0 isn’t fully rolled out in 2014, perhaps some elements of it will be. Instead of HARP 3.0 we could see a “lite” version of the new program called HARP 2.1 or HARP 2.5.

The big news on the HARP 3.0 front lately is that Mel Watt has been confirmed as the new head of FHFA, the entity that oversees Fannie Mae and Freddie Mac.

This appointment is significant because Watt is perceived to be more friendly to the consumer, and less on the side of big banks and lending institutions.

Watt’s new role could be the tipping point for HARP 3.0. Watt’s predecessor, Ed DeMarco, was hesitant to implement aspects of HARP 3, because he was more focused on decreasing Fannie Mae and Freddie Mac’s role in the housing market. But with Watt at the helm, we could see some big changes to the HARP refinance program.

HARP 3 could:

• Allow non-Fannie Mae and –Freddie mac loans participate in HARP
• Remove or extend the HARP cutoff date of May 31, 2009
• Allow those who have used HARP to use it again
• Remove appraisal fees from all HARP loans
• Remove income verification requirements on HARP loans

Small HARP 3.0 Changes Could Come in Waves

While Watt is in an extremely powerful position as head of Fannie and Freddie – organizations that guarantee 60% of the nation’s loans – he may meet serious political resistance when implementing some or all of the possible HARP changes.

It’s for this reason that the HARP 3 program may be rolled out slowly. This could result in a program more aptly called HARP 2.1 or HARP 2.5. As more elements are rolled out as the program is tested, we could see a full blown HARP 3.0 program.

HARP 2.1: Extend the HARP Cutoff Date

The HARP progression could start by pushing out the date by which the original loan must have closed. As it stands, the original loan must have closed by May 31, 2009, a seemingly arbitrary date. By pushing out that date to December 31, 2010, for instance, hundreds of thousands more homeowners would be eligible for a HARP refinance.

This small change could end up being christened HARP 2.1.

HARP 2.5: Allow Re-HARPing

A slightly more difficult change would be to allow those who have used HARP to use it again.

When HARP was first available in late 2009, the 30-year fixed interest rate average was around 5% according to Freddie Mac’s interest rate survey. That same survey shows the 30-year rate at 4.48% as of the last week of December 2013.

Related Story: Mel Watt is New Head of FHFA

A homeowner with a $350,000 mortgage at 5% could save $109 per month and almost $40,000 over the life of the loan by dropping his or her rate to 4.48%.

Because the savings would be significant for so many underwater homeowners, letting people refinance with HARP even if they’ve used the program before would put millions of dollars back into the pockets of American homeowners.

If Watt does implement the re-HARPing rule or other aspects of potential HARP changes, we could see something called HARP 3 lite or HARP 2.5 – and possibly sooner than later.

Full HARP 3.0: Allow Non-Fannie and Non-Freddie Loans Use HARP

The last and most difficult change would be to allow homeowners without Fannie or Freddie loans refinance with HARP.

Millions of homeowners purchased houses with non-conforming loans in the 2000s. Non-conforming loans are simply those that didn’t fit within Fannie Mae or Freddie Mac guidelines.

Homeowners who have used non-conforming loans have been stuck with high interest rates and unstable loan products ever since. Because these loans are not owned by Fannie Mae or Freddie Mac, they are not eligible for HARP.

Nor are they eligible for the popular FHA streamline or VA streamline refinances.

The loan types that many people opted for during the loose lending of the 2000s were:

• Subprime loans
• Alt-A loans
• Option ARMs
• Washington Mutual Pay Option ARMs
• Countrywide Pay Option ARMs
• Wachovia and World Savings ARMs
• Negative Amortization loans
• No Income, No Asset Loans
• NINJA Loans (No Income, No Job or Assets)
• Bank Statement Loans (where bank statements proved income)
• Jumbo loans
• Portfolio loans

Many homeowners with these loan types have not defaulted, but faithfully made their payments in hopes that they could refinance into a more stable product like a 15-year fixed or a 30-year fixed. When home values plummeted, they no longer had the equity to obtain a conforming loan.

A full-fledged HARP 3.0 would allow these homeowners to finally get into a long-term mortgage product. It could lower their payments and help them hang onto the house if and when adjustable rates start to rise.

Are HARP 2.1 and HARP 2.5 Coming Soon?

It’s hard to tell the path that HARP will take toward the yet-to-be HARP 3.0 program. We can only hope that with Mel Watt’s appointment as FHFA head, we’ll see HARP changes soon, even if they are slow to arrive.

It’s quite feasibly that in 2014, we could see drastic HARP changes which would help homeowners keep their hard-earned dollars in their own pockets.

Keep checking our HARP 3.0 update center for the latest breaking news on this powerful loan program.

The post If not a full HARP 3.0, we could see HARP 3 Lite: HARP 2.1 or HARP 2.5 first appeared on My Mortgage Insider.