There is a common misperception that struggling homeowners cannot request any mortgage relief until they are behind on their payments. Many homeowners have even been instructed by their mortgage lenders to stop making their payments for at least three or four months so they can apply for a modification of their mortgage terms. Unfortunately, some of these homeowners have stopped making their monthly payments only to have their lenders deny their loan modification applications. This puts them in a worse position than where they started, because they have incurred several months of penalties and risk having their homes foreclosed.
Help is available for qualifying homeowners who are current on their mortgage payments and whose property is “underwater” (i.e., the amount owed on their mortgage is close to or in excess of the value of their home) under the federal government’s Home Affordable Refinance 2.0 Program (“Harp 2”). Before you decide to stop making payments on your mortgage, you should determine whether or not you are eligible for a Harp 2.0 refinancing. If you are eligible, you can refinance your mortgage at a reduced interest rate with one of the many lenders that participate in the program without having to pay mortgage insurance on your loan or pay off any principal at the time of the refinancing.
The main eligibility requirements for the program are:
1. Your mortgage must be currently owned by Fannie Mae or Freddie Mac and they must have purchased it prior to May 31, 2009. You can check to see if your mortgage is owned by one of these entities at: www. fanniemae.com/loanlookup/ and www.freddiemac.com/corporate/.
2. You must be current on your mortgage, meaning that you cannot have had any payments more than 30 days late within the past six months or more than one payment more than 30 days late within the past 12 months.
3. Your mortgage loan-to-value ratio (i.e., the amount owed on your mortgage compared to value of your house) must be at least 80%.
If you are behind on your mortgage payments now, you can become eligible for the Harp 2.0 program in the future if you bring your mortgage current (in accordance with the requirements of paragraph #2 above) at any time within the next 12-month period. You may also need to meet additional eligibility requirements for a Harp 2.0 refinancing that are established by the particular lender, such as a minimum credit score.
Eligibility notwithstanding, it is important to note that the Harp 2.0 program is not the best option for every homeowner. As such, an eligible homeowner should consult with a qualified attorney or mortgage broker before taking additional steps. Homeowners who wish to participate in the Harp 2.0 program, should act quickly because the refinancing must take place no later than December 31, 2013. Even if you are not eligible for a Harp 2.0 refinancing, there are other options available to you such as streamlined refinancing if you have a Federal Housing Authority mortgage or various programs offered by the Connecticut Housing Finance Authority. For more information, please contact Mark W. Klein (mklein@brodywilk.com).