What is HARP / "Making Home Affordable" all about?
The HARP / Making Home Affordable Program is part of the Obama Administration's broad, comprehensive strategy to get the economy and the housing market back on track. The Making Home Affordable Program offers a potential solution for borrowers: refinancing mortgage loans through the Home Affordable Refinance Program (HARP).

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Home Affordable Refinance

1. I'm current on my mortgage. Will a refinance under the Home Affordable Refinance Program (HARP) help me?
2. How do I know if I am eligible for a refinance under HARP?
3. How do I know if a refinance under HARP will improve the long term affordability or stability of my loan?
4. How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?
5. I owe more than my property is worth. Do I still qualify for a refinance under HARP?
6. I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?
7. Will refinancing lower my payments?
8. What are the interest rate and other terms of a refinance under HARP?
9. Will a refinance under HARP reduce the amount that I owe on my loan?
10. Can I get cash out to pay other debts?
11. How do I apply for a refinance under HARP?
12. What documentation will I need?
13. I am delinquent on my mortgage. Will I qualify for a refinance under HARP?
14. Will I need mortgage insurance?
15. How long will refinances under HARP be available?

What Else Do I Need to Know?

1. Who is my "loan servicer"? Is that the same as my lender or investor?
2. Why does my loan servicer have to ask the lender or investor if they can do a loan modification?
3. What should I do if my servicer tells me that the investor is not participating in the Making Home Affordable Program?

Home Affordable Refinance

1. I'm current on my mortgage. Will a refinance under the Home Affordable Refinance Program (HARP) help me?

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.

2. How do I know if I am eligible for a refinance under HARP?

You may be eligible if:

• The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac (Don't know? See below);
• At the time you apply, you are current on your mortgage payments ("current" generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months, or, if you have had the loan for less than 12 months, you have never missed a payment);
• The amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property;
• You have a reasonable ability to pay the new mortgage payments; and
• The refinance improves the long term affordability or stability of your loan.


3. How do I know if a refinance under HARP will improve the long term affordability or stability of my loan?

Your lender will give you a "Good Faith Estimate" and a Truth in Lending Statement; between the two disclosures you will see your new interest rate, mortgage payment and the amount you will pay over the life of the loan. Compare this to your current loan terms. If the proposed new payment is not an improvement, refinancing may not be right for you. But consider that refinancing from an adjustable rate loan (an ARM) to a fixed rate loan or eliminating higher risk loan terms such as interest only payments or balloon payments may also provide long term stability. For example, refinancing from an ARM with a low introductory teaser rate or from an interest-only mortgage into a fixed-rate loan product may actually increase your payment in the short term, but would improve your ability to sustain mortgage payments over the long-term.

4. How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?

You should call your mortgage lender or servicer (the organization to whom you make your monthly mortgage payments) and ask about the program.

Both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available.  Borrowers can enter information to determine if either agency owns or guaranteed the loan.  This information is not a guarantee of eligibility for a refinance under HARP, as other qualifying criteria must also be met.  

• For Fannie Mae
• 1-800-7FANNIE (8am to 8pm EST).
• www.fanniemae.com/loanlookup
• Freddie Mac 
• -800-FREDDIE (8am to 8pm EST)
• www.freddiemac.com/mymortgage


5. I owe more than my property is worth. Do I still qualify for a refinance under HARP?

Eligible loans will include those where the first lien mortgage does not exceed 125 percent of the current market value of the property. For example, if your property is worth $200,000 but you owe $250,000 or less on your first lien mortgage you may qualify. The current market value of your property will be determined after you apply to refinance.

6. I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?

As long as the amount due on the first lien mortgage is less than 125 percent of the value of the property, borrowers with more than one mortgage may be eligible for a refinance under HARP. Your eligibility will depend, in part, on two additional requirements: first, that the lender that has your junior lien mortgage must agree to remain in a junior lien position, and second, on your ability to meet the new payment terms on the first lien mortgage.

7. Will refinancing lower my payments?

The objective of a refinance under HARP is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a new mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.

Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and payment. These borrowers, however, could save a great deal over the life of the loan by avoiding future mortgage payment increases. When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

8. What are the interest rate and other terms of a refinance under HARP?

The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by your lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.

9. Will a refinance under HARP reduce the amount that I owe on my loan?

No. The objective of a refinance under HARP is to help borrowers get into more affordable or stable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you pay over the life of the loan.

10.  Can I get cash out to pay other debts?

No. However, borrowers whose loans are owned or guaranteed by Fannie Mae may be eligible to finance all closing costs and obtain a small amount of cash (up to $250) through the refinance if there is sufficient equity. Borrowers whose loans are owned or guaranteed by Freddie Mac may be eligible to finance transaction costs equal to the lesser of 4 percent of the current unpaid principal balance of the loan being refinanced or $5,000. In addition, such borrowers may obtain up to $250 cash.

11.  How do I apply for a refinance under HARP?

You should call your mortgage lender and ask for a Home Affordable Refinance application. The number is on your monthly mortgage bill or coupon book. Please be patient. Lenders and servicers are implementing the program now and it may take time before they are ready to process all applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.

Alternately, you may apply through a lender approved to do business with Fannie Mae or Freddie Mac. Nearly all major banks and mortgage brokers have this approval.

12. What documentation will I need?

It will help your lender if you gather some information and documents before you call. Generally, you will need:

• Information about the monthly gross (before tax) income of all the borrowers on your loan, including recent pay stubs if you receive them, or documentation of income you receive from other sources.
• Your most recent income tax return.
• Information about any junior lien mortgage on the house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all your other debts such as student loans and car loans.
  
  
13. I am delinquent on my mortgage. Will I qualify for a refinance under HARP?

No. Borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months generally will not qualify. You should contact your servicer to see if a modification under the Home Affordable Modification Program is an option for you.

14.  Will I need mortgage insurance?

If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for a refinance under HARP. If your existing loan does not have private mortgage insurance, it will not be required as part of a refinance under HARP.

15.  How long will refinances under HARP be available?

The program expires on June 10, 2010. Your refinance under HARP must have a mortgage note date on or before that date.

What Else Do I Need to Know? 

1. Who is my "loan servicer?"  Is that the same as my lender or investor?

Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan.  Your servicer may also be your lender, which means they could also own your loan; however, many loans are owned by groups of investors and these investors hire loan servicers to interact with borrowers on their behalf.  Also, many lenders no longer interact with their borrowers; they too have the loan servicers handle all contact with borrowers.

Traditionally, banks used money deposited in customers' savings accounts to make loans.  They held the loans, earning the interest as borrowers repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing borrowers repaid their loans.  Many families who wanted to own a home were unable to do so because there was not a steady supply of money for banks to lend.  

Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds.  The investors get the right to collect future payments and the bank gets cash that it can use to make more loans.  Investors hire loan servicers to collect payments and interact with customers. 

If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.

2. Why does my loan servicer have to ask the lender or investor if they can do a loan modification?

If the organization that services your loan does not own it, your servicer may need to get permission from the owner or investor before they can change any of the terms of your loan.  Generally, there is a contract between the servicer and the investor that states what kind of actions the servicer is allowed to take.  Most of these contracts, usually called servicing agreements or pooling and servicing agreements (PSAs), give the servicer a lot of leeway to make modification decisions, so long as the modification provides a better financial outcome for the lender or investor than not modifying the loan. 

3. What should I do if my servicer tells me that the investor is not participating in the Making Home Affordable Program?

As contracts with servicers are signed, the list of participants will be posted at http://www.MakingHomeAffordable.gov/.  Borrowers should check first to see if their servicer is listed.   If so, you should call your servicer back and ask to speak to a supervisor or you may contact a HUD-approved housing counselor for assistance.  If your servicer is not participating in the Program, you should ask your servicer or a housing counselor about other workout options that may be available.