What HARP 2.0 Means for Homeowners

The government touted its Home Affordable Refinance Program (HARP) as a way to get the crumbling housing market on the road to a quick recovery and provide much-needed relief to struggling homeowners. Launched in March 2009, HAMP was supposed to help millions of homeowners get out from mortgages that were worth more than the house-- but to date, critics say it has fallen short of expectations. Now the government has refined the program, known as HARP 2.0, in an effort to assist the millions that need a lower mortgage bill.

“HARP has been around for a couple of years but hasn’t been that helpful to that many people,” says Bob Walters, chief economist at Quicken Loans. Many people that needed the help couldn’t qualify, he adds.

To qualify under the original HARP program, your loan-to-value ratio had to be less than 125%-- but for many struggling homeowners, their home value fell significantly below that, freezing them out of HARP.  To be eligible for HARP 2.0, people need to have a home valued at less than their mortgage, and the loan has to be with Fannie Mae or Freddie Mac. The mortgage has to be in good standing, and homeowners need to have a good payment history for the last 12 months. The new HARP program will expire at the end of 2013.  To check who owns a loan go here.

The original HARP program was geared toward the five biggest loan servicers Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Ally Financial and JPMorgan Chase (NYSE:JPM), which limited the amount of loans that could get refinanced, according to Walters. This new plan includes mortgage companies across the country; these new servicers can now qualify a borrower for a HARP loan even if the borrower’s previous loan had mortgage insurance attached to it. According to Walters, this process was extremely difficult for non-servicers in the past. Mortgage insurers, which have to sign off on a refinancing for customers that have mortgage insurance, are currently working with lenders to develop a process that lets the mortgage provider and the insurer share information to streamline the process. When that happens, Walters says more people will see HARP loans get approved.

In December as part of HARP 2.0, pricing changes went into effect that lowered the costs to HARP borrowers. Coming in March, borrowers with loan values exceeding 125% will also be eligible for HARP. While in theory the loan to value could be unlimited, Walters says companies are still going to be cautious about lending to people with high loan to value ratios even though Fannie Mae and Freddie Mac are taking on the risk. “There’s been so many defaults and nobody wants to foreclose,” says Walters.

The government is also hoping to make the approval processes quicker by eliminating, in many cases, the need for an appraisal.

For homeowners with a service provider that doesn’t offer the HARP program don’t give up.

“If you get an unsatisfactory answer don’t stop, call someone else,” says Walters. “People shouldn’t assume the first no means they can’t get help.