Thursday, February 2, 2012

Another New Refi Program? Get the Facts!

During the 2012 State of the Union Address, President Obama announced another expansion of the federal mortgage refinance program :
That's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust. (From the State of the Union Address)

The current versions of the refinance program (HARP and HARP II) allow homeowners whose loans are owned by Fannie Mae, Freddie Mac or the Federal Housing Finance Agency, to refinance to current historically-low interest rates, EVEN IF the loan value exceeds the value of the home (allows "underwater" homeowners the opportunity to refinance).

On Wednesday, February 1st, the president released additional information about the proposed expansion of the refinance programs:

The proposed program (HARP 3?) would allow ALL homeowners who are current on their mortgage — even those who do not have loans backed by Fannie, Freddie or FHFA and even if they're  underwater on their mortgage — to also refinance their loans.

The proposal put forward by the administration includes some details about the who would qualify:

  • only owner-occupied, single-family homes are eligible.
  • Homeowners must be current on their mortgage and not had a lat payment for at least the past six months; 
  • Homeowners must have a minimum FICO credit score of 580; 
  • The loan amount cannot exceed the current federal conforming loan limit. 

For those who meet the criteria, the program would allow for a streamlined application process in which lenders would only need to confirm that a homeowner is employed and the home would not have to be appraised.

NOW... What does this REALLY mean for the average Minnesota Homeowner who might want to refinance?

  • Even though HARP II was announced in October of 2011, as of early February 2012, very few lenders and servicers have processes and procedures in place for homeowners to take advantage of the refinance program.  Any formal expansion to the program announced today would take MONTHS before a homeowner would likely be able to work out a refinance with their lender.  (See our blog post on the HARP 2.0 announcement in October, here)
  • Most Importantly, this expanded program will require CONGRESSIONAL APPROVAL. Given the fact that we are in a rather contentious election year... approval by congress is far from certain.

We'll continue to monitor this program, and if the program expansion does become a reality, we'll notify Minnesota Homeowners via this blog and our website, here.

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