Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. It is possible that the owner of your mortgage also services it, however many loans are owned by groups of investors and these investors hire loan servicers to interact with homeowners on their behalf. Many lenders also have the loan servicers handle all contact with homeowners. Traditionally, banks used money deposited in customers' savings accounts to make loans. They held the loans, earning the interest as homeowners repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing homeowners repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money for banks to lend. Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers. If you have questions about your loan, or you are behind on your payments, you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
All servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate. Additional servicers are strongly encouraged to participate. (See How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?)
What should I do if my servicer tells me that the investor is not participating in the Making Home Affordable Program?
Keep in mind that all servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate with respect to those loans but you are not obligated to your current servicer/lender. You can choose another servicer/lender. (See How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?)
I’m current on my mortgage. Will a refinance under the Home Affordable Refinance Program (HARP) help me?
Eligible homeowners who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.
You may be eligible if:
- The mortgage MUST be owned or guaranteed by Fannie Mae or Freddie Mac (See How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?)
- The mortgage MUST have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The mortgage CANNOT have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- The current loan-to-value (LTV) ratio MUST be greater than 80%
- The borrower MUST be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
- You have a reasonable ability to pay the new mortgage payments.
- The refinance improves the long term affordability or stability of your loan.
The objective of a refinance under HARP is to provide creditworthy homeowners who have shown a commitment to paying their mortgage the opportunity to get into a new mortgage with better terms. Homeowners whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Homeowners who are paying interest only, who have a low introductory rate that will increase in the future, or who face a balloon payment may not see their current payment go down if they refinance to a fixed rate and payment. These homeowners, however, could save a great deal of money by reducing the amount of interest you pay over the life of the loan. Refinancing into a more stable fixed-rate loan product and avoiding future mortgage payment increases would likely improve your ability to sustain your mortgage payments over the long-term. When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
No. The objective of a refinance under HARP is to help homeowners get into more stable or more affordable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe. (See How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?)
How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?
When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
Both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available. Homeowners can enter information to determine if either agency owns or guaranteed the loan. This information is not a guarantee of eligibility for a refinance under HARP, as other qualifying criteria must also be met. For Fannie Mae: www.fanniemae.com/loanlookup For Freddie Mac: www.freddiemac.com/mymortgage
There is no longer a maximum LTV limit for borrower eligibility. If the borrower refinances under HARP and their new loan has a fixed rate mortgage, there is no maximum LTV. If the borrower refinances under HARP and their new loan is an adjustable rate mortgage, their LTV may not be over 105%.
As long as the amount due on the first lien mortgage is less than 125% of the value of the property, homeowners with more than one mortgage may be eligible for a refinance under HARP. Your eligibility will depend, in part, on two additional requirements:
- The lender that has your junior lien mortgage must agree to remain in a junior lien position.
- You must be able to demonstrate your ability to meet the new payment terms on the first lien mortgage.
The rate will be based on market rates in effect at the time of the refinance and the homeowner will be subject to any associated points and fees quoted by your lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.
No. The Home Affordable Refinance will not return cash to the borrower for the purpose of paying other debts.
It's as simple as clicking on the Button. A HARP specialist will analyze the data, direct or guide you to all the benefits HARP has to offer. Harp Lann Direct has moments of higher than average volume. Please be patient and you will be helped as soon as possible. It will also speed up the process if you have the necessary documents ready for the HARP specialist. Generally, you will need the following: Information about the monthly gross (before tax) income of all the homeowners on your loan, including recent pay stubs if you receive them, or documentation of income you receive from other sources
- Your most recent income tax return
- Information about any junior lien mortgage on the house
- Account balances and minimum monthly payments due on all of your credit cards
- Account balances and monthly payments on all your other debts such as student loans and car loans
No. Homeowners who are currently delinquent or have been more than 30 days overdue during the past 12 months generally will not qualify. Contact your servicer to see if a modification under the Home Affordable Modification Program is an option for you.
If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for a refinance under HARP. If your existing loan does not have private mortgage insurance, it will not be required as part of a refinance under HARP.
The program expires on December 31, 2013. Your refinance under HARP must have a mortgage note date on or before that date.
Condominiums are already eligible under HARP and, under the enhanced program, condominiums that originally met Fannie Mae/Freddie Mac requirements remain eligible.
We are further streamlining Fannie Mae/Freddie Mac's existing use of AVM (automated valuation model) estimates of properties. Where there is a reliable AVM estimate of value provided by Fannie Mae/Freddie Mac, a new appraisal will not be needed. Where there is not a reliable AVM value, a new appraisal will be required.
Timing will vary by mortgage lender. Fannie Mae/Freddie Mac will be sending operational instructions to lenders by November 15th, 2011. Some lenders may be able to accommodate mortgage applications under some of the enhancements by December 1 while it could take other lenders additional time to incorporate the expanded program into their systems. In addition, some of the enhancements such as delivery of loans with LTV greater than 125 should be operational during the first quarter of 2012.
Borrowers who owe more on their mortgages than their homes are worth may be locked into their homes for years and have fewer financial options until they pay down the loan balance. A shorter term mortgage enables such borrowers to pay down the amount they owe much faster than a traditional 30-year mortgage. Furthermore, interest rates on shorter term mortgages usually are less than on thirty-year mortgages. The lower interest rate may provide borrowers the opportunity to shorten the term of their mortgages without much change in their monthly payments, and perhaps even a reduction in that payment. Such an outcome may strengthen the borrower’s financial condition and lower the credit risk for the servicer/lender that owns or guarantees the loan. A few examples illustrate how this works:These examples are purely illustrative and are not meant to represent interest rates borrowers should expect to pay. They do show that some HARP-eligible borrowers, depending on their circumstances and priorities, may benefit from a shorter term mortgage. Since shorter term mortgages reduce credit risk to Fannie Mae/Freddie Mac because of the faster repayment of principal, there will be no added fee for borrowers that choose shorter terms.
- Assume a homeowner currently has a mortgage on which he or she owes $200,000 and has an interest rate of 6.5 percent – a monthly payment of $1264. If the house is worth $160,000, the homeowner has a current loan-to-value (LTV) ratio of 125 percent.
- If this borrower refinanced into a 30-year fixed-rate mortgage with an interest rate of 4.5 percent, the monthly payment would decline to $1013. But, by refinancing into a 30-year loan, the borrower’s loan balance will not reach $160,000 for ten full years.
- If the borrower chose a 20-year loan term at a rate of 4.25 percent (mortgage rates tend to be less for shorter term mortgages), the monthly payment would be $1238 ($26 less than the borrower currently pays) and the borrower’s loan balance would reach $160,000 in five-and-one-half years.
- If this same borrower refinanced into a 15 year mortgage, assuming an interest rate of 3.75 percent, the monthly payment would be $1454 ($190 more than the current payment), but the loan balance would be below $160,000 in a bit more than three-and-one-half years.