Home Affordable Refinance Program

HARP Loan Program

Homeowners who find themselves upside down on their mortgages due to the housing meltdown and disappearing home values may find a solution with a federal bailout plan. HAMP is the government program that is designed to modify home loans into affordable payments. Now, it will also provide an option to lower the loan balance for those borrowers who owe substantially more than their home is worth.

Upside down homeowners have very few options for refinancing or selling their homes. The government’s solution is to provide a loan modification that not only will lower the interest rate but will also reduce the amount owed so that it is closer to the homes actual value. The idea is to provide incentive for homeowners to keep making payments while they wait out the housing slump and for values to recover.

HAMP loan modification with PRA-Principal Reduction Alternative, will be offered to homeowners who meet the government eligibility requirements. Those borrowers who can meet these basic guidelines may be offered this plan:

Live in the home as primary residence Have a loan balance of $729,750 or less Loan originated prior to Jan 1, 2009 Be facing a financial hardship situation Have a current mortgage expense-including property taxes and homeowners insurance and HOA dues – that equals more than 31% of the household gross monthly income Owe more than 115% of the homes current value

Upside down homeowners need to learn how to apply correctly for this federal loan modification plan in order to take advantage of this principal reduction option. The application process involves submitting a financial statement which details the borrowers monthly gross income and expenses. This information will be used in a standard formula to determine if the homeowner qualifies. It makes sense for borrowers to learn this basic formula ahead of time and use it to fine tune their application. This will ensure the best chance of approval.

Principal reductions have not been widely offered up until now, and many analysts have been pushing for this expansion to the government plan as a way to help the housing market recover. Loan modifications have been lagging behind government goals, and pressure is being placed on lenders and investors to start showing more permanent loan workouts. Distressed homeowners need to contact their lenders and specifically ask to be considered for HAMP with PRA-but first learn how to apply correctly for the best results.