In the wake of the subprime mortgage crisis and economic downturn of 2008, millions of U.S. homeowners saw the value of their homes — and their overall wealth — decline drastically. One of the steps taken by the federal government was to create the Home Affordable Refinance Program, or HARP, which allows eligible homeowners to refinance their mortgages to more favorable terms. More than 3.4 million people have taken advantage of the program, and many more Americans are still eligible.
We asked Roslyn Lash, an accredited financial counselor with Youth Smart Financial Education Services and a member of NerdWallet’s Ask an Advisor network, about things homeowners should know about HARP and how to reap its benefits.
What are the key things people should know about HARP?
HARP is an ideal program for people who have been responsible and have made their house payments on time but are “upside down” on their mortgage — in other words, the owner owes more than the house is worth.
HARP will not decrease the principal amount of the mortgage, but the interest rate will be reduced, which may reduce the overall cost or shorten the loan term. In addition, no upfront fees are required.
In order to be eligible, you must have originated the loan on or before May 31, 2009. You must be current on your mortgage, with no 30-day late payments within the last six months, and with no more than one late payment within the past year. Your mortgage must be owned or guaranteed by the government-sponsored loan programs Freddie Mac or Fannie Mae.
The program is set to expire on Dec. 31, 2016, although it has been extended several times.
What steps should people take?
Contact your lender to determine if you have the type of loan that qualifies for HARP. It’s important to first contact your lender, because each lender may have additional requirements. It’s usually easier to proceed with your current lender since you have already established a satisfactory credit history. HARP offers a new streamlined process that reduces paperwork and may reduce fees, too.
How else can people get their housing payments under control?
If you are having trouble meeting your mortgage obligations, consider seeking housing counseling provided by the U.S Department of Housing and Urban Development. A housing counselor will explore all of your options and can act as a liaison between you and your mortgage lender or creditors. The counselor will also carefully review your budget. If you do not qualify for HARP, the lender may have other programs for which you may qualify.
A budget will provide the lender with a clear vision of your income and expenditures that will demonstrate your inability to pay and explain any delinquencies. The development of a budget or a spending plan will make the counselor’s job easier, and it will justify any assistance provided by the lender.
Roslyn Lash is a financial counselor with Youth Smart Financial Education Services in Winston-Salem, North Carolina.
from NerdWallet
https://www.nerdwallet.com/blog/mortgages/homeowners-need-know-harp-refinance-program/
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