New Year's Day has come and gone, but there's still one more resolution you should make: get a HARP refinance for your underwater or low-equity mortgage, if you haven't done so already.

But you need to act by the end of the year, when the program expires. If you don't, and you're one of the 800,000 eligible homeowners who still haven't refinanced, you'll be throwing away tens of thousands of dollars in mortgage savings made possible by the federal government.

The Home Affordable Refinance Program (HARP) offers an incredibly good deal for mortgage borrowers whose homes lost value during the downturn. It allows you to refinance your old, high-interest rate mortgage at today's low rates, even if your current home value or income would normally prevent you from refinancing.

Refinancing through HARP can provide an average savings of $2,300 per year in mortgage interest, according to the Federal Housing Finance Agency (FHFA), which oversees the program. Freddie Mac reports annual savings may vary from $1,200 up to $6,000, depending the size of one's mortgage and the rate they are currently paying. Borrowers who opt for a shorter term to lop several years off their mortgage payments can save even more.

Some 3.2 million homeowners have already refinanced through HARP, but surprisingly, one-fifth of those who would benefit and could qualify still have not done so - and time is running out. So if you're in that remaining 800,000, or are wondering if you might be, here's a rundown of the key points about the program


#1 - It's not a scam!!!!!!!

Surveys have found that one of the main reasons that qualified borrowers don't take advantage of HARP is that they're suspicious that it might be some sort of scam. That could be because 1) they've heard about bogus mortgage rescue schemes that seek to defraud homeowners; 2) it seems too good to be true; and 3) the program is being aggressively promoted by lenders, many of them fairly small and obscure, using direct mailings that unfortunately may call to mind other, more dubious promotions.

Here's the real deal: HARP is a program created by the federal government. It's run by the Federal Housing Finance Agency (FHFA) through the government-sponsored enterprises Fannie Mae and Freddie Mac. HARP refinances can only be offered through legitimate mortgage lenders authorized to offer Fannie Mae or Freddie Mac loan products - scam artists and fly-by-night operations need not apply.


#2 - It's not welfare!!!!!!

Some qualifying homeowners who might benefit from HARP may have refused to take advantage of it because they assume it's some sort of government handout. It's not.

The way it works is that Fannie Mae and Freddie Mac, who already back the mortgages that qualify for HARP refinancing, have modified their rules to allow lenders to refinance those loans at current rates even though the home's value might not support a conventional refinance.

Fannie Mae and Freddie Mac are already on the hook for those loans, so they're not taking on any additional risk by allowing them to be refinanced. And because mortgages are bundled into securities and sold to investors, the investors who hold your current high-interest mortgage are simply paid off early, and the new low-interest loan is sold to new investors willing to accept the lower rate. That's where the savings come from. Mortgage lenders are willing to do these transactions because they make their money off the origination fees, then sell the loan to investors.


#3 - It's easy

Although many applicants were thwarted by stringent program requirements when HARP was introduced in 2009, changes since then have made it much easier to apply and to qualify. In most cases, the need for a property assessment can be waived, since it doesn't matter how much your property may have fallen in value since you bought it - there's no limit on how far underwater you can be on your mortgage and still qualify.

There's also a streamlined process available to many borrowers that eliminates the need to document your income; a lender can just confirm your job status with your employer. And if you do have to submit tax returns or other income documentation, such as if you're self-employed, the debt-to-income ratio allowed is much more lenient than on a home purchase or conventional refinance - if you have good credit, your new payment can be in excess of 50 percent of your monthly income. So if your earnings took a hit during the recession and still haven't recovered, you can still qualify.


#4 - It's affordable

Many borrowers assume that, because HARP refinances are for mortgages with little or negative home equity, they'll pay a higher rate than conventional mortgage borrowers with similar credit. Not true. The way a HARP refinance is structured, there's no pricing adjustment based on home equity, so you can get the same rate you could on a conventional refinance. You can even buy down your rate by purchasing discount points, which also can be rolled into your loan.

Fees are fairly low as well - it's common for borrowers to pay as little as 2 percent of the loan amount in closing costs. Those can also be rolled into the loan itself, through a limited cash-out option, so you don't have to pay those up front. And because the property assessment can usually be waived, there's no need to pay that charge either.


#5 - Do you qualify?

To be eligible for a HARP refinance, you first have to have a mortgage that's backed by Fannie Mae or Freddie Mac. That's probably the case, unless you have a VA or FHA mortgage - but those have their own refinance options for low-equity and underwater borrowers.

Use these links to find out if your mortgage loan is backed by either Fannie Mae or Freddie Mac.

Other requirements: You must have obtained your mortgage prior to May 31, 2009 and be current on your mortgage payments. You may not have previously refinanced under the HARP program, unless you did so in the first few weeks when it was first offered.

There's no limit on how far underwater on your mortgage you can be and still qualify - that is, it doesn't matter how much the amount owed on your mortgage exceeds the current value of your home. However, you can't have more than 20 percent positive equity - though if you have that, you ought to be able to qualify for a conventional refinance anyway, unless your credit is poor.

You can't refinance a home equity loan or other second mortgage through HARP, and you can't consolidate such loans into your primary mortgage using HARP. If you have such a loan, your lender must agree to resubordinate it to the new HARP mortgage in order to qualify.

You can apply for a HARP refinance through any Fannie Mae or Freddie Mac mortgage lender or broker participating in the program. Most do. You can refinance with your current lender if you wish, but that isn't a requirement. In fact, it's a good idea to check offers from several lenders to find who'll give you the best deal.

But remember: HARP expires after Dec. 31, 2015. If you don't close your loan by then - not just apply - you're out of luck. So if you're one of the hundreds of thousands of eligible borrowers who still hasn't taken advantage of this golden opportunity, don't wait. Time is running out.


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Published on January 5, 2015