Jergler: HARP 2.0 hits right note for homeowners

HARP 2.0 may be music to the ears of Orange County residents who have been struggling, but continuing, to make their home payments.

That's what Todd White, a home mortgage consultant for Wells Fargo Home Mortgage in Newport Beach, believes.

Some also believe Harp 2.0 has the potential to lead to the next huge refinance boom.

HARP 2.0, the second version of the federal government's Home Affordable Refinance Program, is designed to help some 5 million struggling homeowners refinance into a fixed-loan and a lower monthly payment. It targets people who have made their payments on time, but who have lost too much value on their home to refinance.

HARP 2.0 took effect for borrowers with a loan-to-value ratio of greater than 125% in February. A loan-to-value ratio, also known as LTV, is a measure of how much a home is actually worth compared with how much is owed.

Take an Orange County resident who bought a home at $700,000. Now that home is worth $500,000, and they put 20% down at 5.5% or 6.5% interest. Today, they could refinance into a 30-year fixed rate mortgage at 4% if they weren't so far underwater on their home. Because their LTV ratio is so high, they cannot.

In comes HARP 2.0. And down goes the monthly mortgage payment for those who qualify for the program.

"Some people can be saving $200 or $400 per month depending on the loan amount," White said. "The biggest benefit is it's going to reward the buyer who has made their payment on time during this economic downturn."

Because so few people used the original HARP program, President Obama last year announced a planned overhaul to the HARP program to help more struggling homeowners. The original HARP allowed homeowners with mortgages backed by the federal loan agencies of Fannie Mae and Freddie Mac to refinance, but capped the LTV ratio at 125% of the current value of their home.

According to the Department of Housing and Urban Development, you qualify for HARP 2.0 if:

•Your mortgage is owned or guaranteed by Freddie Mac or Fannie Mae;

•Your mortgage was sold to Fannie Mae or Freddie Mac on or before May 31, 2009;

•Your mortgage wasn't refinanced under HARP previously, unless it is a Fannie Mae loan that was refinanced under HARP in 2009 from March through May;

•The current LTV ratio is greater than 80%;

•You are current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

White believes that areas like Orange County in particular will benefit from HARP 2.0, because there's a wide variety of homes from entry level to luxury homes, and a variety of homeowners in trouble.

"When you're talking about Orange County you've got a really good mix," he said. "You've got first-time buyers all the way up to $1 million homes."

He added, "It's been tough in the past because there've been a lot of folks who stopped making their payments and walked away, but the folks who were making their payments on time and playing by the rules were not allowed to refinance. Finally we're starting to see something good happen to those people who have been making payments."

If you believe you qualify, you are advised to contact your current mortgage servicer, or a servicer who is approved by Fannie Mae or Freddie Mac.

"This is something Orange County residents will be glad to hear because there is going to be relief for them," White said.

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