Existing and Proposed Government Housing Refinance Programs

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One of the most frequent questions I receive is around getting guidance on the various government refinance programs on offer. The table below, published in a recent report looking at the effectiveness of existing refinancing programs, provides a succinct summary of the key refinance programs on offer to Americans. It also contains a couple of proposed refinance programs that are currently being reviewed in Congress, that I am also tracking on this blog. I have written a number of refinancing related articles recently and while the current low rates provide an amazing deal, remember that nothing is free. You need to look at all the costs associated with refinancing and then choose the lender or government program that can best meet your long term housing needs.

Existing Programs Key Features and Restrictions
Home Affordable Refinance Program (HARP) • Allows for refinancing of loans owned or guaranteed by Fannie Mae and Freddie Mac.
• Borrower required to pay designated Fannie Mae and Freddie Mac loan level price adjustments, which are fees based on assessed risk.
• Existing level of private mortgage insurance may be retained on new loan, even if current loan to value has increased.
Restrictions
• Borrower must be current on existing mortgage and must not have been more than 30 days late on mortgage payment during prior year.
• Existing loan must be less than 125 percent of current (appraised) home value.
• Borrower must display ability to make new payment.
FHA Streamlined Refinance
 
• Allows for refinancing of FHA loans.
• Provides for reduced documentation and underwriting required to be performed by the lender.
• Borrower upfront costs can be reduced in exchange for either a higher note rate or a larger mortgage principal balance.
Restrictions
• Borrower must be current on existing mortgage.
• Existing loan must be less than 125 percent of current home value.
• Borrower must display ability to make new payment.
FHA Short Refinance • Allows for refinancing of non-FHA loans.
• Holder of existing first mortgage must agree to write off at least 10 percent of unpaid principal balance of the mortgage, resulting in a new FHA loan of no more than 97.75 percent loan-to-value (and a combined loan-to-value of 115 percent if a subordinate mortgage exists).
Restrictions
• Borrower must qualify for the new loan under standard FHA underwriting requirements (including having a credit score equal to or greater than 500).
Proposed Programs Key Features and Restrictions
Housing Opportunity and Mortgage Equity Act (H.R. 363)  • Allows for refinancing of loans owned or guaranteed by Fannie Mae and Freddie Mac.
• Both current and delinquent borrowers are eligible.
• Prohibits appraisal to establish current loan to value.
• Limits interest rate and fees borrower may be charged on new loan.
Helping Responsible Homeowners Act
(S. 170)
 • Allows for refinancing of loans owned or guaranteed by Fannie Mae and Freddie Mac.
• Borrower must be current on existing mortgage.
• Removes limit on current loan to value.
• Limits interest rate and fees (including loan level price adjustments and delivery fees) borrower may be charged on new loan.

Source : An evaluation of large scale mortgage refinancing programs

All the above programs are administered by Fannie Mae, Freddie Mac, or the Federal Housing Administration. Their websites provide more details and eligibility rules for the various programs on offer.

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{ 1 comment… read it below or add one }

Peter October 7, 2011 at 9:30 am

Until jobs are available, it does not matter what refinance rates/programs are available. No one will buy a house until their job is stable.

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