Although not technically dubbed HARP 3.0, the Responsible Homeowners Act of 2013 expands HARP 2.0 and makes it simpler for underwater homeowners to refinance their mortgages into lower monthly payments and interest rates. The bill, introduced in Congress, makes it easier for borrowers to switch loan servicers and eliminates certain closing costs.
The Home Affordable Refinance Program (HARP), launched in 2009 and again as HARP 2.0 in 2011, has already reached several million underwater homeowners. In the hopes of reaching even more and further stimulating the U.S. economy and housing market, Congress is looking to expand HARP 2.0 with the Responsible Homeowners Act of 2013.
Eligibility Under the Responsible Homeowners Act
To qualify for a refinance under the Responsible Homeowners Act of 2013, a Fannie Mae or Freddie Mac backed loan must have been securitized by May 31st, 2009 and must not have already been refinanced under the Pensacola, Florida HARP refinance program (except for HARP refinances conducted between March and May of 2009). The Act also requires that the mortgage to be refinanced have a loan-to-value ratio of at least 80% and that the mortgage be current on all payments for the last six months.
Benefits of the Proposed Bill
The bill, if passed as introduced, would extend the expiration of the Pensacola, Florida HARP by one year to December 1st, 2014, would reduce upfront loan fees, eliminate income and employment verification, and would reduce appraisal costs. These are benefits in addition to reducing monthly mortgage payments and loan interest rates.
Refinance Now or Wait?
With the Responsible Homeowner Refinancing Act of 2013 still being considered by Congress, there is no telling how long an approval could take. Instead of waiting for this bill to become law, homeowners with underwater mortgages are encouraged to seek a refinance under one of the government’s currently approved programs until more is heard about the Responsible Homeowner Refinancing Act. Today, borrowers may be eligible to refinance under programs offered by HARP, the FHA, VA, or USDA, depending on which agency backed the loan. The backing agencies under HARP are Fannie Mae and Freddie Mac, while the others are backed by the agency offering the refinance (a VA refinance is available to VA backed loans).
The Effects of a Refinance on a Current Loan
When a loan is refinanced, its remaining balance is paid off by the refinancing lender which, in some cases, may be the same lender that issued the original loan. The refinanced mortgage pays off and replaces the original mortgage under the terms, and interest rate, of the new loan. Refinancing into an interest rate that is even half a percent lower than an original mortgage can save homeowners hundreds to thousands of dollars over the life of their loan, depending on how much the loan is issued for.
Another strong tactic that typically saves Pensacola, Florida homeowners substantial amounts of cash is refinancing into a lower term loan. This means, instead of refinancing a 30 year loan into a brand new 30 year loan, homeowners should refinance into a 20 or 15 year loan to pay off the loans principal that much faster while paying even less interest over time.
Chris Brown is the premier expert on HARP loans and Government FHA and VA loans. Please visit The Mortgage Chili Blog
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