Underwater Homeowners may get Help from HARP 2.0

Homeowners who owe substantially more than the value of their homes are probably too far underwater to refinance their debt anytime soon. But those who have less debt soon may have an opportunity to refinance at lower interest rates, with renewed help from the government. The government has revamped its Home Affordable Refinance Program or HARP to help more borrowers refinance mortgages owned by Fannie Mae and Freddie Mac.

Eligibility for the new program remains restricted to mortgage borrowers who make monthly payments on time. Qualified borrowers must have unpaid loan balances that exceed 80 percent of the value of their homes. Almost all of the HARP refinancing in the past has gone to homeowners who owe less than what their homes are worth or a bit more. However, one big change has been the elimination of the maximum loan-to-value ratio. This will allow homeowners deeply underwater to have a better chance at refinancing. Another new feature of the HARP program is reduced liability for lenders based on their promises that the refinanced loans conform to the underwriting standards of Fannie Mae and Freddie Mac.

The elimination of the loan-to-value ratio should help many South Florida homeowners. Because the South Florida housing market has been hit especially hard, the number of borrowers beyond the 125 percent mark is very high. For the last few years they were not able to take advantage of the program because they were too far underwater. They should now be able to do once the new program is implemented.