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The Home Affordable Refinance Program Gets an Overhaul: How It Could Help You

In 2009, President Obama introduced the Home Affordable Refinance Program—an attempt to help a predicted three to four million people struggling with their mortgages to refinance. However, as of July 2010, only about 390,000 people had had their mortgages permanently altered under the program.

Recently, the government implemented new changes in an attempt to expand the program’s eligibility. The most recent overhaul, enacted in November 2011, is designed to help homeowners refinance their mortgages to today’s interest rates, which are currently around 4%–approximately 70% of people behind their mortgages in the US pay 5% or more in interest. Here are the new terms.

Man Holding Small House

The housing market has suffered in the past few years—and seniors, as well as younger homeowners, have suffered. However, the new government program promises to offer relief.


Your credit history won’t necessarily hurt your chances

Under the old rules, even a slightly less-than-perfect credit score could disqualify you. This was problematic for homeowners, as those who are underwater with their mortgages are likely to have credit issues as a result of, or in conjunction with, their mortgage issues. Consumers with tarnished credit histories are often the exact people this program sought to help—so it didn’t make sense to disqualify those without stellar credit.

You don’t have to get your property appraised

In the past, you had to get your property appraised before applying for refinancing. Some people who were upside-down on their mortgages—meaning that they owed more on their mortgages than the home was worth in current market value—were deemed not upside-down enough. Under the new rules, a new appraisal will not be necessary, and all homes are eligible for the program—regardless of how underwater they are.

However, homeowners should be aware that lenders may run what’s known as an “automated valuation model” (AVM) on the home. This is an automated determination of a home’s value that doesn’t involve a physical appraisal. The lender may impose some reliability standards on a home’s value, and may also require a physical appraisal afterwards just to ensure that the home is standing.

Terms are more strict for those who stick to adjustable rates

There is no restriction on loan-to-value ratio for those homeowners who refinance under a fixed-rate mortgage. However, if you choose to stick with an adjustable-rate mortgage, eligible homeowners are limited to a 105% loan-to-value ratio.

You can borrow more

The new rules also aim to increase the amount you can borrow over your home’s existing value. This will be a big help particularly to people who are significantly underwater with their mortgages.

There are a few other criteria that determine who qualifies for a loan under the Home Affordable Care Program. You must be current on your mortgage for the past six months, and you must have made at least one payment in the past twelve months. Your loan must have been sold to Fannie Mae and Freddie Mac before June, 2009—you can find out whether or not this is the case by visiting the websites of either Freddie Mac* or Fannie Mae**. And you must not have previously refinanced your home under the program’s old rules.

The housing market has suffered in the past few years—and seniors, as well as younger homeowners, have suffered. However, the new government program promises to offer relief to a wider group of homeowners nationwide. Under the old program, many homeowners who felt they should have qualified were turned down for refinancing—and the government hopes that with these new relaxed restrictions, the situation will be improved. Hopefully, the program’s new criteria will help ease the mortgage burden for millions of Americans—and help the housing market make progress, as well.