President Barack Obama travelled to Las Vegas on Monday, October 24, to discuss the Federal Housing Finance Agency's announced changes to the Home Affordable Refinance Program. Bypassing Congress, the President has signed Executive Orders to institute these changes, with several more on the horizon. Speaking to the crowd in Nevada, President Obama stated that "we can’t wait for an increasingly dysfunctional Congress to do its job. Where they won't act, I will."
The changes will increase the number of homeowners who are eligible for mortgage refinancing under HARP, which since April 2009 has allowed 1 million homeowners to refinance their mortgages even if they owed more than their house was worth. The Treasury has allocated $7.6 billion to programs in the states hit hardest by the housing crisis, including Michigan.
What's Changed
With the new guidelines, the loan-to-value ratio cap of 125 percent is eliminated. Struggling homeowners will not be turned away because they owe more than their house is currently worth. Some closing costs are reduced or eliminated, making refinancing more affordable. The changes will also increase competition between banks, allowing homeowners to shop around for the best refinancing option for their situation.
Eligible Homeowners
To qualify for a HARP refinance, the loan must be owned or backed by Fannie Mae or Freddie Mac as of no later than May 31, 2009. (Both Fannie Mae and Freddie Mac provide a look-up function to determine if they own a mortgage on a particular property.) Additionally, homeowners must be current on their mortgage payments, have no late payments in the past six months, and no more than one late payment in the past 12 months. The minimum loan-to-value ratio is 80 percent; this program is not intended for those who have significant equity in their homes.
Fannie Mae and Freddie Mac will begin sending information to lenders mid-November; some lenders may begin processing applications as early as December 1, while others may not be able to start the new refinancing program until early 2012. Homeowners interested in a HARP refinance should first determine whether their loan is owned or guaranteed by Fannie Mae or Freddie Mac. If it is, the homeowner should then contact their lender, or any lender participating in HARP refinancing, for further information.
Help for Michigan Homeowners
In addition to HARP refinancing, the State of Michigan is a recipient of federal Hardest-Hit Fund monies to provide assistance to struggling homeowners. The Step Forward Michigan plan works with homeowners and lenders to prevent foreclosures in certain situations.
The Unemployment Mortgage Subsidy Program provides up to 12 months of assistance by paying the lesser of $750 or 50 percent of the mortgage amount during a period of unemployment. The Mortgage Loan Rescue Program provides up to $10,000 for delinquent mortgage payments, property tax payments, or escrow shortages for homeowners recovering from an involuntary hardship. The Principal Curtailment Program provides up to $10,000, matched by the lender, to reduce the principal on a mortgage in order to produce an affordable monthly mortgage payment.
For More Information
Making Home Affordable (US Government)
Know Your Options (Fannie Mae)
Avoid Foreclosure (Freddie Mac)
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