While underwater homeowners may still be a common theme today, the government recently enacted a new Home Affordable Refinance Program to help eligible participants pay down the principal on their home mortgage loan without having to pay mortgage insurance.

The new HARP 2.0 Refinance Program was made available to U.S. homeowners as of March 17, 2012 and those eligible have until Dec. 31, 2013 to refinance.

“You can use HARP even if you’re really far underwater on your mortgage. There is no loan-to-value restriction under the HARP mortgage program so long as your new mortgage is a fixed-rate loan with a term of 30 years or fewer,” said Dan Green, a loan officer with Waterstone Mortgage in Columbia, Md. “If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105 percent.”

The original HARP program (also known as the Making Home Affordable program) was started in April 2009 and changes were rolled out by the Federal Home Finance Agency on October 24, 2011, and confirmed by Fannie Mae and Freddie Mac on November 15, 2011.

The original version of HARP had several roadblocks that made it difficult for homeowners to refinance. Originally, the program only assisted those with mortgages with a loan-to-value ratio between 80-125 percent, but in many hard-hit housing markets across the country, homes have lost more than 50 percent in value, making those homeowners ineligible for the program.

To be eligible today, a loan must be backed by Fannie Mae or Freddie Mac, and the mortgage must have a securitization date prior to June 1, 2009. If you have an FHA, USDA or jumbo mortgage, you are not HARP-eligible.

One of the changes within the new HARP 2.0 program is that borrowers will now be able to refinance regardless of how far their homes have fallen in value. Previous loan-to-value limits were set at 125 percent.

Appraisals and underwriting have also been eliminated, as most homeowners will no longer be required to get an appraisal or have their loan underwritten, making the refinance process smoother and faster.

In addition, certain risk-based fees for borrowers who refinance into shorter-term loans will either be eliminated or modified.

It’s also important to note that the program will only work on a first mortgage.

“HARP 2.0 is meant for first liens only,” Green said. “Second liens are meant to subordinate. You’ll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.”

Remember, the Home Affordable Refinance Program is not meant to save a home from foreclosure. It’s meant to give underwater homeowners a chance to refinance without paying PMI.

For more information about HARP 2.0, contact our office today.