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Consumer Watch: Refinance program gives ‘underwater' homeowners breathing room

Feb. 9, 2012 - 01:52PM   |   Last Updated: Feb. 9, 2012 - 01:52PM  |  
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If you think HARP can help you refinance, here are some things you should know:
Whether your mortgage is owned by Freddie or Fannie. Click here or call 800- 732-6643; or click here or call 800-373-3343.
Lenders aren’t required to participate. Freddie Mac’s website has a map of some participating lenders.
Lenders’ timelines vary. For example, Chase and Wells Fargo both said they were lifting the loan-to-value ceiling Feb. 6. Wells Fargo will be able to make that change by Feb. 13. Quicken Loans expects to implement it in mid-March. Some lenders may be more restrictive in their HARP guidelines. But they can’t be more liberal than the Fannie Mae and Freddie Mac guidelines.
You can refinance with another lender. Borrowers whose loans are owned by Fannie Mae or Freddie Mac can contact any mortgage lender offering HARP refinances.
There are qualifications. Among other things, you need to be current on your loan payments. And HARP is available only for those whose loan-to-value ratio is above 80 percent.
You can save on fees. The expanded HARP eliminates risk-based fees when you refinance into 20-year or shorter-term mortgages and caps those fees at 0.75 percent of the loan balance for other borrowers ($1,500 on a $200,000 loan). Other fees still apply.
HARP ends Dec. 31, 2013.

If you haven't been able to refinance your home because you owe more on the mortgage than the home is worth, the expanded federal Home Affordable Refinance Program might be able to help.

HARP applies to such "underwater" mortgages that were sold to Fannie Mae and Freddie Mac by May 31, 2009.

HARP lifts the current 125 percent loan-to-value ceiling for fixed-rate mortgages. For example, if the balance on your mortgage is $200,000 and the value of your home has fallen to $150,000, your loan-to-value ratio would be 133 percent. Before now, you would not have qualified for refinancing at today's lower rate, possibly saving hundreds of dollars a month. At press time, rates for 30-year fixed-rate mortgages hovered just below 4 percent.

Read the fine print

Check the eligibility requirements carefully. HARP applies only if you are living in the home. If you moved on permanent change-of-station orders and found a renter, this likely won't apply. If the property was a second home or investment property when the original loan was made, you may be able to use HARP, said Stefanie Johnson, a spokeswoman for the Federal Housing Finance Agency.

If you qualify for this refinance, you should seriously consider it, said Bob Walters, chief economist for Quicken Loans.

"Given how low interest rates are, you should absolutely refinance," he said.

That could be especially important if you think you may be facing PCS orders this summer and expect to have to rent out your home.

Expanded hardship

If you don't qualify for HARP, you may still benefit from one of Fannie Mae's and Freddie Mac's streamlined refinance products, which have many of the same benefits as a HARP refinance, said Johnson, of the Federal Housing Finance Agency.

Fannie and Freddie have reminded their loan servicers that they should not tell troops that they must go into default before they can be helped, Johnson said.

Visit, or to learn more, or call the Fannie Mae Military Support hotline at 877-645-4566.

Let your lender know

A number of lenders work with military families who are struggling with payments because of PCS orders or other reasons. Bank of America officials in January modified Army Lt. Col. Chris Meredith's mortgage, reducing the principal by $80,000 and allowing him to refinance his home. His second-mortgage lender, PNC, reduced his interest rate from 8.25 percent to 1 percent a year ago.

Now his same $2,500 monthly mortgage payment is eating away at principal, rather than paying only interest. Thanks to these lenders' changes and his continued payments, his $394,000 in mortgages has dropped to $302,000.

Lenders urge military families to check with them to find out about programs specifically geared to the military.

Help with VA loans

Some service members and veterans with loans backed by the Veterans Affairs Department may be eligible for a program that rewards them with cash for staying current on their mortgage payments. For those who are underwater, the Responsible Homeowner Reward program pays an initial reward, then adds money to the account for each month the homeowner makes a payment on time.

Building up enough cash reward to offset the negative equity in your home could allow you to refinance to a lower rate. The homeowner claims the reward, which is paid by the mortgage company, when refinancing or otherwise paying off the house for example, when selling it, said Frank Pallotta, managing partner of Loan Value Group, which administers the program for mortgage companies. The rewards range from hundreds to thousands of dollars, depending on the value of the home, the size of the mortgage and the amount of risk, Pallotta said.

About 100 mortgage companies are involved. The largest is GMAC. In the two years since the program began, more than 7,000 military and veteran homeowners have been credited with nearly $200 million, Pallotta said.

Participation is up to the mortgage company, so call yours to ask about it. Pallotta said about half of the companies that have come onboard have done so because they received calls from troops and veterans.

"As long as you remain current on your loan, you can never lose the reward," he said.

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