HARP 2 Refinance For Homeowners With Underwater Mortgages

This BLOG On HARP 2 Refinance For Homeowners With Underwater Mortgages Was Updated On November 18th, 2018

The 2008 Real Estate and Mortgage Meltdown has devastated the real estate market. It left millions of homeowners with mortgage balances higher than the value of their homes.

• This meltdown of real estate values has devastated millions of American homeowners who really relied on the equity in their homes
• Many homeowners counted on selling their homes with equity
• Many considered downsizing to a less expensive home and relied on the equity as part of their retirement

Homeowners who planned on selling their homes and relocating to retirement communities like Florida, Texas, Michigan, Mississippi, Indiana, Kentucky, New Jersey, Pennsylvania, Colorado, Georgia, Illinois, Arizona, and California had to postpone their retirement and plan on working until their home values recovered.

HARP 2 Refinance Was Solution For Upside Down Mortgages

Unfortunately, millions of people have homes that have plummeted in value due to the real estate and credit market crash of 2008. They have lost all of their equity in their homes.

Worse yet, these homeowners were left with two choices:

• Be stuck in their homes because their mortgage is higher than the value of their homes
• Others could not afford their mortgage payments
• This was due to having teaser rate mortgages and ended up abandoning their homes
• Others are still making their monthly mortgage payments preying that someday they will break even
• A lucky few had home loan modifications done with their current lenders
• They restructured their current home loans

What Is The HARP 2 Refinance Program

The HARP 2 Refinance program was a relief to millions of homeowners who had Conventional mortgages:

• To qualify, homeowners needed to have conventional mortgage loans that have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009
• The homeowners had mortgages with high-interest rates where the balances of their mortgage loans exceeded the value of their homes
• Homeowners who owned homes that have fallen below the mortgage balance qualified for the HARP Refinance Mortgage Program
• These homeowners had negative equity in their homes
• Had to come up with money if they were to sell their homes

Benefits Of HARP 2 Refinance Program

HARP 2 is a refinance option for homeowners that had mortgages “underwater.” By underwater mortgages, it meant that the homeowner owed more on their home mortgage than their home was worth.

In order to be eligible for the HARP 2 refinance program, you must meet certain criteria:

• First, you must not have refinanced through the original HARP program.
• You need to be current on monthly mortgage payments with no late payments over 30 days due in a minimum of 6 months, and no more than one late payment in the previous 12 months.
• Your mortgage must be backed by Fannie Mae or Freddie Mac and must have been bought by either Fannie or Freddie before May 31st, 2009.  
• The purpose of HARP is to allow homeowners who owe a mortgage that is more than the value of their home a more affordable and stable mortgage.
• Remember that your current mortgage has to be a Fannie Mae or Freddie Mac Loan and the loan must have been sold to FANNIE MAE or FREDDIE MAC no later than May 31, 2009

Many potential clients of mine did not qualify for the HARP Refinance because their loan was either not a Fannie Mae or Freddie Mac Loan or they missed the target deadline date of May 31, 2009.

HARP 3.0 JUST A DOORSTEP AWAY

Rumor has it that the new HARP 3.0 is just around the corner.  We are predicting that HARP 3.0 will be in effect in the first quarter of 2013.  Once HARP 3.0 is in effect, all of the homeowners who have their mortgages underwater can seek relief by refinancing.  I personally know of homeowners who have mortgage rates as high as 8% who are stuck on a home that the value dropped from $200,000 to $62,000. Her mortgage amount is $144,000.00 and she did not qualify for the HARP 2 Refinance Program because she did not have a Fannie Mae or Freddie Mac Loan.

We will keep you posted with the first news we get on the HARP 3.0 REFINANCE PROGRAM.  If you need a pre-approval fast, click on APPLY NOW FOR PRE-APPROVAL

UPDATE TO HARP 2 REFINANCE MORTGAGES

This blog was updated on November 18th, 2018. Many changes happened during the housing and credit market.

• Most homes that were underwater has recovered from the 2008 Real Estate and Credit Collapse
• The real estate market is hot nationwide
• Florida and California were two of the hardest hit states due to the Great Recession of 2008
• However, almost every county in both states have recouped the drop in real estate values and homeowners have seen the light at the end of the tunnel
• Real estate in many parts of the country are increasing double digits and there are more home buyers than an inventory of homes
• Credit requirements have lightened up
• Gustan Cho Associates is one of the few national mortgage lenders with no lender overlays
• Gustan Cho Associates has a national reputation of closing loans in 21 days or less

HARP 2 Refinance Mortgage will expire on December 31st, 2018. However, Gustan Cho Associates has many other alternative financing programs to help homeowners save money. Contact us for details.

Qualifying For Home Loans With Direct Lender With No Overlays

Here are the basic mortgage lending requirements at The Gustan Cho Team at NEXA Mortgage, LLC dba as Gustan Cho Associates

• No Overlays on FHA, VA, USDA, and Conventional Loans
• 21 days closings on most mortgages
• Minimum credit scores on FHA, USDA,  and VA Loans is 580 FICO
• Conventional Loans require a 620 credit score which includes second homes and investment homes
• 95% LTV Jumbo Mortgages
• 100% Loan To Value Cash Out Refinance on VA Loans
• No debt to income ratio requirements and no overlays on VA Loans
• The Team at Gustan Cho Associates is available 7 days a week including evenings, weekends, and holidays
• NON-QM Loans for home buyers one day out of bankruptcy and foreclosure
• Non-Warrantable and Condotel Financing
• Advanced Buyer Fast Track TBD Mortgage Loan Program
• FHA 203k Rehab Loans
• Reverse Mortgages
• Bridge Loans

Comparison with Other Government Refinancing Programs

1. FHA Streamline Refinance vs. HARP 2.0
   • Eligibility: FHA loans only vs. Fannie Mae/Freddie Mac loans.
   • Process: Streamlined with no appraisal/credit check vs. standard refinance process.
   • Benefits: Reduced paperwork and potentially lower rates vs. refinancing underwater mortgages.
2. VA IRRRL vs. HARP 2.0
   • Eligibility: VA loans only vs. Fannie Mae/Freddie Mac loans.
   • Process: Simplified with no appraisal/credit underwriting vs. standard refinance process.
   • Benefits: Lower interest rates and simplified process vs. refinancing underwater mortgages.
3. Freddie Mac Enhanced Relief Refinance vs. HARP 2.0
   • Eligibility: Freddie Mac loans only vs. Fannie Mae/Freddie Mac loans.
   • Process: Similar to HARP 2.0, it allows high LTV refinances.
   • Benefits: Lower rates and improved loan terms, similar to HARP 2.0.
4. Fannie Mae High LTV Refinance Option vs. HARP 2.0
   • Eligibility: Fannie Mae loans only vs. Fannie Mae/Freddie Mac loans.
   • Process: Similar to HARP 2.0, no LTV limit.
   • Benefits: Lower rates and improved loan terms, similar to HARP 2.0.
5. Traditional Mortgage Refinancing vs. HARP 2.0
   • Eligibility: Open to all homeowners meeting lender criteria vs. specific Fannie Mae/Freddie Mac loans.
   • Process: Standard refinance process vs. streamlined for underwater mortgages.
   • Benefits: Competitive rates and terms based on market conditions vs. targeted assistance for underwater homeowners.

Subordination of Second Mortgages under HARP 2.0

Handling Second Mortgages and Home Equity Lines of Credit (HELOCs)

1. Understanding Subordination
   • Subordination refers to adjusting the priority of debts in the event of a default.
   • First mortgages take precedence over second mortgages or HELOCs, meaning they are paid first if the borrower defaults.
2. Challenges with Second Mortgages and HELOCs
   • When refinancing a first mortgage under HARP 2.0, existing second mortgages or HELOCs can complicate the process.
   • The second mortgage holder must agree to retain a subordinate (second) position behind the new first mortgage.

Process of Subordinating Second Mortgages under HARP 2.0

1. Communication with Lenders
   • The homeowner or their primary lender must contact the holder of the second mortgage or HELOC.
   • Request the subordination agreement, which confirms that the second mortgage lender agrees to stay in a subordinate position.
2. Approval from Second Mortgage Lender
   • The second mortgage lender reviews the request to ensure the new loan terms do not excessively increase risk.
   • Approval is necessary for the HARP refinance to proceed.
3. Documentation and Submission
   • Required documents include the new loan terms and details of the HARP refinance.
   • The second mortgage lender may request an appraisal or other financial documentation.
4. Subordination Agreement Execution
   • Once the second mortgage lender agrees, they provide a subordination agreement.
   • This legally binds them to remain in a subordinate position relative to the new first mortgage.
5. Completion of HARP Refinance
   • After securing the subordination agreement, the HARP refinance process can proceed to close.
   • The refinance is completed with the new first mortgage recorded in the first lien position, followed by the subordinated second mortgage.

Benefits of Subordination under HARP 2.0

1. Maintaining Lower Rates
   • Allows homeowners to benefit from lower interest rates and better terms without paying off second mortgages or HELOCs.
2. Preserving Loan Terms
   • Enables the continuation of favorable terms on existing second mortgages or HELOCs while improving first mortgage conditions.
3. Financial Stability
   • Helps homeowners achieve greater financial stability by reducing monthly payments and saving on interest costs.

Considerations

1. Lender Cooperation
   • Success depends on the willingness of the second mortgage lender to cooperate.
   • Not all lenders may agree to subordinate, which can impede refinancing.
2. Potential Costs
   • Obtaining a subordination agreement may involve fees, which should be included in the overall cost of refinancing.
3. Timing
   • Securing a subordination agreement can add time to refinancing, so homeowners should plan accordingly.

Frequently Asked Questions (FAQs)

1. What is HARP 2.0?

Home Affordable Refinance Program is a federal initiative designed to help homeowners with underwater mortgages refinance their loans to more favorable terms, even if they owe more than their home’s current market value.

2. Who is eligible for HARP 2.0?

Eligibility for HARP 2.0 requires that your mortgage is owned or supported by Fannie Mae or Freddie Mac and originated before May 31, 2009. You must also be current on your mortgage fees, with no late fees in the last six months and no more than one late payment in the last 12 months.

3. Can I use HARP 2.0 if my mortgage is not supported by Fannie Mae or Freddie Mac?

No, HARP 2.0 is specifically for mortgages owned by Fannie Mae or Freddie Mac. If your loan is not backed by either, you will not be eligible for this program.

4. How does HARP 2.0 help underwater homeowners?

HARP 2.0 enables homeowners to refinance their mortgages at lower interest amounts or more favorable terms, decreasing monthly payments and saving thousands of dollars over the loan’s duration, even if the mortgage balance exceeds the property’s value.

5. What are the benefits of refinancing through HARP 2.0?

Benefits include:

• Securing a lower interest amount.
• From an ARM to a fixed-rate mortgage.
• Reducing monthly payments.
• Building equity faster.

6. Does HARP 2.0 have a loan-to-value (LTV) limit?

HARP 2.0 removed the previous 125% LTV cap, allowing homeowners to refinance regardless of how much their loan exceeds their home’s value.

7. What documents are needed to apply for HARP 2.0?

Required documents typically include proof of income (pay stubs, tax returns), your mortgage statement, and your current mortgage and property details.

8. Can I refinance a second mortgage with HARP 2.0?

HARP 2.0 does not refinance second mortgages. However, second mortgages can be subordinated, meaning your second mortgage lender agrees to retain you in a secondary position.

9. How long does the HARP 2.0 refinance process take?

The process can vary but generally takes 30 to 45 days from application to closing, depending on lender processing times and the completeness of your application.

10. Are there any out-of-pocket costs associated with HARP 2.0?

Refinancing through HARP 2.0 may involve closing costs similar to those of a traditional refinance. These can often be rolled into the loan amount to minimize out-of-pocket expenses.

11. Does HARP 2.0 require an appraisal?

In many cases, HARP 2.0 does not require an appraisal, streamlining the process and reducing costs, particularly for severely underwater properties.

12. What happens if I’m denied a HARP 2.0 refinance?

If denied, you can seek clarification from your lender and explore alternative options. Checking with other lenders may also be beneficial, as eligibility criteria can vary.

13. Is HARP 2.0 still available?

HARP 2.0 was available until December 31, 2018. However, similar refinancing options may be available through other programs, so it’s advisable to consult with a mortgage advisor.

14. How do I start the HARP 2.0 refinance process?

Contact your mortgage or HARP-approved lender to discuss your eligibility, gather the required documents, and complete the application process.

Gustan Cho Associates has no overlays on government and conventional loans. We also offer non-qm loans and alternative financing programs. Our 95% LTV NON-QM Jumbo Loans only require 5% down payment with no private mortgage insurance required. Our bank statement loan program for self-employed borrowers does not require any tax returns. We offer non-qm loans with credit scores down to 500 FICO. Please contact us at 800-900-8569 or text us for a faster response. Or email inquiries at gcho@gustancho.com.