HARP 2.0 may provide help for more troubled borrowers

Back in November, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac announced new guidelines for the Home Affordable Refinance Program (HARP).

Why? The original HARP program — which was set up close to three years ago to help homeowners refinance their mortgages — wasn’t as effective as hoped. Less than 1 million homeowners benefited from the original HARP, and that had a lot to do with declining property values in a lot of markets. The original program required homeowners wanting to refinance to owe no more than 125 percent of what their homes were worth — a guideline that people who took out risky loans found hard to meet, especially in markets where values continued to fall.

HARP 2.0 was put in place in an attempt to reach more homeowners. The “125 percent” guideline was eliminated. Also, there were other requirements set up to require less money up front from buyers wanting to refinance, ways to expedite the loan process, etc.

So, is HARP 2.0 working? It may well be. According to federal estimates, refinance applications have increased by 50 percent since last fall; about one-third of those are from borrowers seeking assistance through HARP 2.0. Borrowers who are able to refinance can save an average of $2,500 per year through HARP 2.0, according to federal estimates.

In short, HARP 2.0 appears to be working right now, and it can help homeowners save some money. Interest rates are hovering around 4 percent, thus opening up the potential to save some serious cash through refinancing.

What’s the catch? There are some guidelines that must be followed and some preparations to make. Here are a few things to keep in mind for anyone wanting to refinance a mortgage through HARP 2.0:

• Are you current on your mortgage? The

Borrowers who are able to refinance can save an average of $2,500 per year through HARP 2.0, according to federal estimates.”

guidelines require borrowers to be current on their mortgages. That means the last six payments must have been on time with only one payment more 30 days late in the past year.

• Is your loan old enough? Only mortgages funded before June 1, 2009, are eligible. Grab your closing paperwork and look for the funding date to figure out if your loan is old enough to qualify.

• Make sure Fannie Mae or Freddie Mac backs your mortgage. HARP 2.0 is only available for loans guaranteed by those two government-sponsored enterprises. To find out if you qualify along those lines, check out fanniemae.

com/loanlookup and/or freddiemac.com/corporate.

• Does your mortgage have lender-paid mortgage insurance (LPMI?) If so, you won’t be eligible for help through HARP 2.0. If your mortgage insurance is itemized — rather than built into your mortgage rate — then you do not have LPMI and are, therefore, eligible for HARP 2.0 help.

• Got paperwork? If you want to refinance through HARP, you’re going to need plenty of supporting documentation. Grab those pay stubs, W-2s, bank statements, drivers license and any other financial documentation you believe will be relevant.

Need some help navigating through HARP 2.0? Visit with your local mortgage banker — someone who deals with putting together successful refinancing packages regularly. The federal government has been almost obsessed over the past few years with helping homeowners in trouble. HARP 2.0 may just be the program that has the potential to do a lot of good.