HARP 2.0 can make it easier to pay your underwater mortgage

Photo: crimfants

HARP 2.0 has helped hundreds of thousands of underwater homeowners refinance their homes since its inception one year ago.

The original Home Affordable Refinance Program, a government initiative to stave off foreclosures, began in 2009. It was so restrictive that few homeowners benefited.

HARP 2.0 expanded eligibility by removing the 125% loan-to-value (LTV) cap that prevented many homeowners from refinancing under the first HARP’s rules.

Last year, homeowners refinanced 228,144 mortgages that exceeded the home’s value by more than 125%. In 2011, homeowners refinanced 0 homes with that LTV, states the a report from the Federal Housing Finance Agency. It also shows that in December 2012, 25% of loans refinanced through HARP had an LTV greater than 125%.

Jim Duffy, a senior loan officer with Cole Taylor Mortgage outside Atlanta, says that before HARP 2.0, many homeowners felt trapped and were constantly seeking options.

“Do they aggressively pay down their underwater mortgage, do they short sell the home and move?” he says, pointing out that short sales damage credit, thereby limiting relocation options.

Those who have refinanced now have peace of mind and can get on with their lives, Duffy says.

But HARP 2.0 isn’t right for everyone who qualifies.

“If a homeowner’s plan were to sell their home in a short time period, it may not be financially smart to refinance, as there are costs associated with a refinance,” says Sue Pullen, vice president and senior mortgage advisor at Fairway Independent Mortgage in Tucson, Ariz.

Also, “If the home is not working for you and your family, then saving some off the payment will not fix the location or the commute or the school system or whatever it is that makes you really want to move,” Duffy says. In that case, a short sale might be more sensible.

Get the full story in my Interest.com article, HARP 2.0: Mortgage program reboot has boosted refis.

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