The housing debacle of the last decade is getting further and further away in our rear view mirror. Yet there are still homeowners who are still feeling the effects of falling home values and slower home sales. Home ownership reached record levels in the mid-2000s as more and more home buyers entered the market. Different types of loan programs were introduced that allowed more people to buy and finance a home that couldn’t qualify with previous mortgage programs. Often these new loans asked for little down and loosened credit standards. Loan programs called “stated” loans approved borrowers without any documentation regarding income, assets or the ability to make the monthly payments. This “easy money” drove up the home values as more and more wanted to get in on the housing boom. We all know what happened soon thereafter. Home sales slowed, lenders foreclosed and banks went out of business.

This bursting bubble also meant those that were able to keep their homes and had good credit couldn’t take advantage of lower interest rates because those borrowers owed more on their mortgage than their homes were worth. Refinancing an existing conventional mortgage requires at least a 10 percent equity position. Borrowers who were upside down with their mortgage not only had no equity at all but it would take thousands to pay down the mortgage just to be in a position to refinance.

Congress then introduced the original Home Affordable Refinance Program, or HARP. This mortgage allowed borrowers to refinance an existing loan as long as the current mortgage didn’t’ exceed 125 percent of the current appraised value. While this program helped, it still fell short as millions of home owners still couldn’t refinance because of the 125 percent limit. Congress fixed that problem and introduced HARP 2.0.

HARP 2.0 doesn’t require an appraisal. This means lenders can approve a HARP 2.0 request and pay no attention to the amount owed compared to the value of the home. There are some basic requirements but they’re relatively easy to meet. There can be no more than one payment in the last 12 months more than 30 days late and no such payments within the past six months. There is no appraisal required and there is no credit check other than researching the mortgage payment history and the existing mortgage must have been completed before June 1, 2009. The loan must also be owned by either Fannie Mae or Freddie Mac and both have a spot on their website that allows homeowners to type in their name and property address to see if in fact their loan is owned by either Fannie or Freddie.

There are borrowers who may have tried to use the original HARP to refinance to a lower rate but discovered they couldn’t do so because they were so underwater on their mortgage. Many of those same borrowers may not be aware that the HARP 2.0 program gets rid of the restrictions on value and pays no attention to value at all as long as the borrowers meet the basic requirements. Borrowers can expect to provide employment and income information and complete the loan application but the HARP 2.0 loan program is an excellent option.

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