Credit unions are determined to not allow their underwater members to sink like the Titanic by delivering HARP 2.0 relief.
Introduced late last year, Home Affordable Refinance Program otherwise known as HARP 2.0, is an updated version of the initial government program. Originally designed to help underwater borrowers, HARP ended up helping hundreds instead of thousands, which caused more homeowners to continue to slip under in their mortgage even further.
Toward the end of 2011, President Obama announced an updated version of HARP designed to alleviate the specific issues borrowers were having with the first version.
How HARP 2.0 Can Help
Jordan Masi, Marketing Specialist at Arizona State Credit Union ($1.3 billion, Phoenix AZ) says this program could have a positive impact not only on the borrower but also on the economy as a whole. “While the economy is improving, many homeowners are upside down on their homes, meaning what they owe is greater than the value of their homes,” she explains. “By allowing these people to refinance and reduce their monthly mortgage payments, we are helping the homeowner as well as the local Arizona community in which they live.”
While the program doesn’t lower the principle, it does allow for a lower monthly payment so people can stay in their homes, Masi adds. “The program also helps local businesses, as homeowners then have more money for spending. When there is a boost in sales, these businesses can hire more people, lowering the unemployment rate. When these people have jobs, there is more likelihood that they can save and better plan for their futures. Programs like HARP add further value to the credit union’s cooperative model - when one member benefits, they all benefit.”
What’s new with HARP and how will the new program help more underwater borrowers?
Deeply underwater borrowers may now qualify. In the past there was a limit to how far underwater you could sink in your mortgage in order to qualify for HARP. Too many borrowers had sunk too deeply to meet the original 125% loan-to-value cap, so the new program has removed that cap opening the program to anyone, no matter how deeply underwater you are or how far your home value as fallen.
No on-site appraisal. The appraisal system has also been updated. Lenders can use automated systems to generate an estimated value for your home instead of requiring an on-site appraisal. Borrowers glean two benefits which include no up front costs for the appraisal and avoid rejection for being unable to meet the 125% cap.
Lower or no fees. In the past borrowers had to pay certain risk-based fees, however those have been banished under the new program for those refinancing a mortgage of 20 years or less. Previous fees could typically equate to 2% of your total loan amount (which were paid up front), which made refinancing difficult for a struggling borrower. Mortgages refinanced to a 30 year term now have fees capped at 0.75% (or $750 per $100,000 of the mortgage). These fees can be rolled into the loan or removed just by paying a higher interest rate.
Income verification requirement lifted. Unless your payments will increase by more than 20% a month (because you are shortening your loan term), you no longer have to meet specific income requirements under HARP 2.0 to refinance.
Condominium constraints changed. Under the original version of HARP, borrowers were prevented from refinancing if a certain owner owned 10% of the units or if 20% of the units had fallen behind on association dues. HARP 2.0 removed that restriction so more condo owners could qualify for refinance.
Borrowers should take note that some of the original rules still apply to the new program such as having a mortgage backed by Fannie Mae or Freddie Mac (acquired before May 31, 2009) and the borrower must be current on mortgage payments. The rule is that the borrower cannot have more than one late payment over the past year and no late payments in the last six months. Also, you cannot have refinanced through HARP in the past.
Apply for HARP 2.0 Through Your Credit Union
For most members, mortgage refinance means that they turn to their credit union first. Although not every lender in the country offers this program, many credit unions, like Tropical Financial Credit Union ($700 million, Miramar, FL) are thrilled to provide this program to its membership.
Helen McGiffin, Chief Lending Officer says that members should know that they can refinance their first mortgage even if they owe more than the value. “There is no maximum loan to value requirement. Rock bottom rates are available with more flexible credit requirements.” She adds that refinancing is quick and easy and will take about 30 days to close their loan.
McGiffin says that the credit union has been able to save members a substantial amount of money in the short time it’s been available. “Our mortgage loan officers have been able to refinance loans for borrowers who are ‘underwater’ and they were able to reduce borrowers monthly payments by $300 to $700.00 per month and reduce interest rates from over 5.5% down to 4.25%.”
“TFCU sees this program as a great opportunity to reach out and help the home owners in our community take advantage of refinancing their homes at record low interest rates, even if they owe more than the current value,” McGiffin adds.
Like Tropical Financial, Arizona State Credit Union is receiving a tremendous response from the membership and has accepted 350 plus HARP loans valued at $52 million in process. In fact the credit union has moved a few loans through to closing this week.
“The program provides much needed flexibility by removing the loan to value restrictions,” Masi says. “The credit union encourages those looking at HARP to review the qualifying guidelines for credit, debit to income ratios and other factors. By contacting Arizona State Credit Union, we can review members’ eligibility for the program.”
Masi explains that the interest rate savings has been substantial for many members. “Interest rate savings have been 2% on average, resulting in a monthly savings of $300 to $400. However, we have seen members save as much as $800. The experience has been very rewarding for the credit union’s loan officers and the members we’ve helped have been extremely grateful. The loan officers have even received hugs, tears of joy and the several notes of thanks from our members.”
Sinking in your mortgage and need a lifeline? Find a credit union and inquire whether they offer HARP 2.0.
By Gina Ragusa