Certain homeowners who are underwater on their mortgages — and think they have no chance of refinancing — may still have hope.
The Obama administration last week announced major changes to a program that could help more than 1 million borrowers take advantage of historically low mortgage rates — and in turn make lower monthly payments.
Changes to the federal Home Affordable Refinance Program, widely known as HARP, include nixing the 125 percent loan-to-value cap for fixed-rate loans, a requirement that impeded many borrowers, and eliminating some fees to help homeowners save money.
Government entities Freddie Mac and Fannie Mae will share the new guidelines with lenders and servicers by Nov. 15. Until then, here's a step-by-step guide on whether you’re a likely candidate.
STEP ONE
Find out if Freddie Mac or Fannie Mae owns the note to your home. The note owner is different from the servicer, the company to which you send you mortgage payments every month. For example, Freddie Mac may be the note owner, but your servicer may be Bank of America.
STEP TWO
How do you know if Freddie or Fannie owns your note? Check their respective websites and fill in the designated blanks to get a confirmation. The sites are fanniemae.com/loanlookup and https://ww3.freddiemac.com/corporate
AP file photos.
STEP THREE
Don’t have a computer? You can call (800) 7FANNIE or (800) FREDDIE. Hours for both hot lines are 5 a.m. to 5 p.m. Pacific time.
STEP FOUR
Be sure to enter your address exactly as it appears on your original loan documents. For example, don’t enter “Main Street” if your records show “Main St.” “It’s that sensitive,” said Jonathan Jerotz, vice president of mortgage lending for Guaranteed Rate in San Diego.
STEP FIVE
If the note is owned by Fannie Mae, the result will say “Match Found.” For Freddie Mac, the result will say “YES, Freddie Mac is the owner.”
STEP SIX
The program will take effect as early as Dec. 1.
What will the changes do?
• Cancel certain risk-based fees, leading to lower closing costs for homeowners who refinance into loans with shorter terms.
• Get rid of the 125 percent loan-to-value cap.
• Eliminate the need for banks to pay for “representations and warranties,” which are in place in case borrowers default on their mortgages. This change is meant to make lenders feel more confident about underwriting the refinanced loans.
• Eliminate the need for new appraisals when an automated estimate is available.
• Revise HARP’s expiration date to Dec. 31, 2013.
How do I know if I'm eligible?
• Your home loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.
• The loan-to-value ratio must be more than 80 percent.
• Homeowners must be current on mortgage payments in the past six months. They can’t have more than one late payment in the past year.
• Borrowers must be able to afford the refinanced mortgage payment.
What should I keep in mind?
• It’s important to keep paying your mortgage.
• Lenders are not required to take part in the revamped program. So far, major banks including Bank of America and Wells Fargo say they’ll participate. However, implementation may vary.
• Assuming you qualify for the program, consider how long you plan to live in your home and when you plan to retire. Those factors could impact what’s financially best, said Michael Zau, mortgage banker at W.J. Bradley Mortgage in Rancho Bernardo.
Reach reporter Lily Leung at lily.leung@uniontrib.com or 619-293-1719.
via: http://www.signonsandiego.com
