One of the factors that helped our economy pull out of the recession caused by the financial crisis was the introduction of the Home Affordable Refinance Program, or HARP. First introduced in 2009 then later revised in 2011 this refinance program allowed borrowers to refinance their mortgages even though they owed more than the home was currently worth. Traditionally in order to refinance an existing conventional mortgage the maximum loan amount was limited to 90% of the current appraised value of the property. With the initial HARP, this initial obstacle could be overcome.
The first HARP allowed borrowers to refinance up to 125% of the current appraised value and that helped but there were millions more homeowners who owed much more. HARP 2.0 was introduced to eliminate the need for an appraisal altogether as long as the monthly payment was being lowered with a lower rate or the borrowers wanted to get out of the instability of an adjustable rate mortgage and into a fixed rate loan. This means the 125% maximum loan amount was removed. This also means someone who applied for the first HARP might have found out their loan was much greater than 125% of the appraised value. For those that were turned down for the first HARP because of this, they should contact a lender now and reapply, even if they were denied in the past.
Another requirement for HARP 1.0 and now HARP 2.0 is the loan must be owned by either Fannie Mae or Freddie Mac. Conventional loans are easily bought and sold in the secondary mortgage market. This keeps the mortgage market liquid freeing up credit lines in order to let lenders make still more mortgage loans. Lenders who make conventional loans can sell those loans to other mortgage lenders or if they’re approved they can sell loans individually or in bulk directly to Fannie Mae of Freddie Mac. The mortgage company a borrower makes a payment to is not necessarily the same organization that owns the loan. Those payments go to the loan servicer.
Fannie Mae and Freddie Mac have information on their websites that allows borrowers to input their names and property address to see if in fact their loan is owned by Fannie or Freddie. This again means that someone who was denied a HARP 2.0 loan in the past because their loan was not at Fannie or Freddie and later their loan was sold to either can apply once again for an approval even though they were turned down for a previous HARP application. If either of these instances applies to you and you still need to refinance, it’s time to contact your lender and apply once again.