Lazy Man and Money

HARP: How it Can Work for Florida Homeowners

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The following is guest post by Annie Davis. It’s no secret that I’m a huge fan of the HARP program. I don’t live in Florida… it can work anywhere.

With mortgage interest rates hovering around all-time lows, many homeowners are considering refinancing. Refinancing offers a number of benefits to homeowners, provided they’re in a good place to do so. One alternative to traditional refinancing for Florida homeowners is HARP (Home Affordable Refinance Program), which helps homeowners who are underwater in an existing mortgage refinance successfully without the burden of paying down principal and mortgage insurance.

HARP Helps Troubled Homeowners

HARP started back in 2009 after the housing crisis placed thousands of Florida homeowners in distress. With rising interest rates, homeowners with variable mortgage rates suddenly found that they couldn’t afford their skyrocketing monthly payments. Thousands of homeowners went into default and many into foreclosure.

The U.S. Government created HARP as an alternative for helping distressed homeowners regain their financial stability, while saving their homes in the process. With a few benefits beyond those of a typical mortgage refinance, HARP is a life-saving option for many Florida homeowners. Lenders such as Foundation Mortgage help homeowners navigate the various refinancing options available and choose the program most suitable for their needs.

Underwater? No Problem

Traditional refinancing is ideal for homeowners who have a lot of equity in their properties, enabling them to cut their monthly payments, lower interest rates, and even take cash out for home improvements. But these refinancing programs don’t make sense for homeowners who are underwater, which means the current mortgage balance exceeds the current value of the home.

After first rolling out the HARP program, the U.S. Government discovered that the value limitations (which required the loan-to-value ratio to fall between 80 and 125 percent) meant that many homeowners couldn’t take advantage of the program. Changes that rolled out in 2011 meant that more borrowers can refinance their mortgages, regardless of how much their home decreased in value. However, this is true only if you opt for a fixed-rate mortgage. If you refinance to an adjustable-rate mortgage, you’re limited to 105 percent of your home’s value.

No Mortgage Insurance

Most mortgage lenders require mortgage insurance if the borrowed price is more than a certain percentage of the home’s value, typically 80 percent. That means homeowners who finance the full purchase price of the home usually pay mortgage insurance, which adds up to a few hundred dollars to the monthly mortgage payment.

Homeowners refinancing through HARP aren’t required to carry mortgage insurance as long as they didn’t have it with the previous loan. This applies regardless of whether the loan-to-value ratio exceeds 80 percent.

Fannie Mae and Freddie Mac-Backed Loans

HARP is specifically designed for mortgages currently backed by either Freddie Mac or Fannie Mae. Homeowners with FHA loans or VA loans have other refinancing alternatives which also help distressed homeowners get back on track with their home loans. There’s a difference between a loan servicer and a loan backer.

To find out who holds your mortgage, check with Fannie Mae’s Know Your Options and Freddie Mac’s websites.  Many mortgage loans not backed by FHA or VA are held by one of the two. If your loan doesn’t show up in a search on either site, you’re not eligible for HARP.

Consider Closing Costs

The HARP program eliminates some of the fees typically applied to high-risk loans, if borrowers refinance for a shorter-term mortgage. But borrowers using HARP still incur closing costs, making this cost-to-savings ratio a major factor in whether refinancing is really worth it. Borrowers save somewhere between $150 and $300 per month with HARP, provided that the upfront closing costs don’t wipe out any potential savings.

Closing costs range between $600 and several thousand dollars, depending on the loan value and interest rate. HARP usually works best for homeowners who originally obtained loans with interest rates between six and eight percent.

No Appraisals in Some Cases

If your current lender offers HARP, refinancing through the same lender sometimes means no appraisal is required, under certain circumstances. If your current lender doesn’t offer HARP or you choose a different lender for refinancing, a new appraisal is usually necessary. A new lender also re-underwrites your loan, where an existing lender often does not.

Using your existing lender streamlines the refinancing process and often makes it quicker. If you’re in dire financial straits and you need an immediate solution, sticking with your current lender is a good idea, if possible. Eliminating appraisals and other documents cuts down on closing costs, too.

If you’re considering a HARP refinance loan, consult with a reputable Florida mortgage and refinance specialist, evaluate your personal financial circumstances, the value of your home, and the current interest rates. A Florida mortgage specialist helps homeowners create a cost-benefit analysis, including the number of months or years it takes to recoup your closing costs through savings in reduced monthly payments.

Millions of American Homeowners Could Refinance and Save with HARP

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This post brought to you by Quicken Loans. All opinions are 100% mine.

by Clayton Closson

You read that title correctly.

An estimated 2.7 million American households could refinance to today’s mortgage rates (which are near historic lows, in case you haven’t been paying attention) through the gov’s HARP program. And they can do it even if they owe more money than their home is worth. Up to 200%. But they aren’t. And we don’t know why.

Why don’t they want to lower their mortgage payment?

Why don’t they want to shorten the term of their loan?

Why don’t they want to save thousands in mortgage interest?

We wish we knew, because then we could reach out to them and explain why they absolutely should take advantage of HARP while it’s still around. Which brings up some good news for American homeowners. HARP has been extended through 2015. That’s a good thing. The bad thing is that mortgage rates most likely won’t stay as low as they are for very long. At some point, once rates rise, the ability to save money with HARP may be diminished.

Jordan Fylonenko recently met with Quicken Loans Chief Economist Bob Walters to discuss HARP and what’s going on with the millions of folks who haven’t taken advantage of it.

Before we show you the video, here’s some info on HARP from our Press Room:

The FHFA’s announcement to extend the HARP deadline to 2015 is much needed for the estimated 2.7 million underwater homeowners who are eligible and still able to benefit by refinancing. Unfortunately, a too-good-to-be-true perception coupled with long lines to refinance and repeated “no’s” from lenders who are not utilizing HARP to its fullest extent have left many disgruntled to enter another arduous loan process. But for those homeowners needing a personal stimulus, picking up the phone again is well worth it.

The average savings from a HARP refinance is around $200 a month with an average rate reduction of 1.75%, resulting in $2,400 savings per closed loan per year and $74,000 per lifetime (assuming a 30-year mortgage). The potential stimulus for the economy is even more significant, reaching up to $6.5 billion ($2,400 in savings a year per consumer x 2.7 million consumers).

These savings are more than just numbers on a spreadsheet. A Quicken Loans client and active duty Air Force recruiter from Sacramento, CA, was able to cut $763 off his monthly payment for his investment property and lowered his rate down by more than a point through HARP. This was after his original lender told him they couldn’t help.

Another Quicken Loans HARP client from North Brunswick, NJ, was able to save $387 on his monthly payment and lower his rate by more than a point to 3.85%.

In a monthly video series, Markets and Musings, Quicken Loans Chief Economist sat down to discuss some of the recent changes that have opened up HARP to more underwater homeowners.HARP

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What’s Better than a Double Rainbow? A Double HARP!

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Remember this guy who sounded like he made sweet love with a vision of a double rainbow?

If it sounded like that guy was heaven, you should have heard me when I got the news that I’d be getting a double harp. It was angelic.

It wasn’t the angel’s kind of harp, but the Home Affordable Refinance Program kind of HARP.

That kind of HARP was created by the Feds to help those who are underwater or close to it, refinance with today’s rates. For people like my wife who bought in 2003 or me who bought in 2005, this program represents a great opportunity. Due to the drop in housing prices, many of us have no equity and 6% interest rates. This is a double whammy. With no equity, lenders wouldn’t consider refinancing under today’s low rates. The person buying now can get a similar condo to the one I bought in 2005 for about 30%, at a 30-year fixed interest rate of 3.5%.

We put down 20% and could make the payments, but being responsible worked against us when we tried to take advantage of refinancing under the recent low interest rates. Mortgage lenders only wanted to reduce rates on people who were behind on payments. It lead me to write “Lower the Interest Rate on Your Mortgage Without Refinancing?” more than three years ago.

This past December I thought I had it all figured out, I was going to use a HARP to Save Money with a HARP-Refinance on an Investment Property. It would bring down from a 5.875% rate to a 5.04% rate. At the time, it looked like it was going to save me $250 a month, which is huge. Then I realized there was there was something that they left out. It should have been obvious, but I would be taking a 30-year mortgage that I’m already 7 years into and reset it to 30-years again. While the rate is cheaper and there would be still some savings, most of the savings came from spreading the mortgage over a longer period. I tried to pursue a 15-year mortgage, but at the time HARP mortgages would only allow you to refinance to a lower monthly payment (the point was to save people money). With the refinance costs on top of that, I decided that wasn’t right for me and pushed the mound of paperwork into the trash.

A few weeks ago, I noticed that interest rates had continued to drop even further. This time I called up USAA, which is my bank of choice, and ask them about my options for refinancing. It never hurts to ask, right? It turns out that their underwriters don’t do condominiums that are investment properties, but they have a partnership with Wells Fargo to cover that exact scenario. I met all the requirements for the newest version of HARP (they seem to be pushing out updated legislation every 6-9 months lately), and that allowed me to get into a 15-year mortgage at 3.5%… amazing for an investment property at nearly 100% Loan to Value (LTV). The monthly payments would be almost exactly what I am paying now. This may not seem like a bit deal, but I’ll cut 8 years off of paying a mortgage.

Next up, I asked about my wife’s mortgage. She was told previous that because her loan wasn’t serviced by Fannie Mae or Freddie Mac, she wouldn’t qualify for a HARP. However, I figured that once again, it wouldn’t hurt to ask. Also, since she didn’t buy at the exact top of the market she was close to 80% LTV allowing for a traditional refinance. It turns out that whatever information she was given before wasn’t correct or no longer applicable. Her property qualifies as well. She only has 21 years of mortgage payments, but she’ll save a little money each month in addition to eliminating 6 years of mortgage payments.

It seems like a lot of people could benefit if they knew about the HARP program. Maybe it is just me, but I’ve found that very few organizations are actively publicizing it.

Take a minute and imagine what your life might be like if you had your next 96 payments of your mortgage covered… now double that. Certainly beats the pants off of a double rainbow! The only downside is that it is A LOT of paperwork. They are also saying that I might need to get additional flood insurance reminiscent of the time I almost got tricked into buying flood insurance I didn’t need.

Three years ago when I wanted to refinance the rates were at 4.875%. In December I almost refinanced at 5.04%. It seems like good things come to those who wait.