Home Affordable Refinance Program

Home Affordable Refinance Program (HARP) helps homeowners with refinancing their current mortgages. Homeowners that owe more money than their home’s existing value can also benefit from a HARP Home Affordable Refinance Program. This program assists responsible borrowers with reducing their monthly principal and interest rates so they are able to make payments without being financially stressed.

Refinancing is a term that is used for replacing an existing debt obligation with a different type of financing option. Refinancing plans vary and many factors such as inherent risk, currency stability and banking regulations play a role with determining the type of program that is available to homeowners. Offering homeowners lower interest rates is one type of plan that is used for affordable refinance programs. Other plans include consolidating debts into one loan, reducing the monthly payment amount, altering the risks for variable-rate loans and providing long term loans which helps to keep more money in a homeowner’s possession.

Most people who refinance their homes do so because they encounter financial difficulty and it usually results in them paying their mortgage off over a longer period of time. This process helps to make home ownership easier to accomplish for many people but they will not own the deed to their home until a much later date.

Home Affordable Refinance Program – FHFA’s Answer

Home Affordable Refinance ProgramWhen the housing market went into decline during the late 2000s the government had decided to take action in order to slow this process. Since the housing sector of the nation’s economy is crucial to its financial stability the government had authorized the Federal Housing Finance Agency (FHFA) to use the Home Affordable Refinance Program (HARP) to keep many residential homes from going into foreclosure.

HARP is a model program that is used by many financial institutions who offer refinancing plans. Programs that are modeled after HARP is for borrowers who have demonstrated an acceptable mortgage payment history but who cannot refinance their homes due to declining prices or because they lack mortgage insurance. This type of program also applies to individuals who have to move to a more stable mortgage product to prevent foreclosure.

Risks are associated with any type of loan and the home affordable refinance program is not any different. Penalty clauses or provisions are a necessary feature of fixed-term refinancing programs. These provisions are designed financially penalize a borrower who is able to pay off their loan at an early date. This type of penalty is also activated when a refinanced loan is paid off early in part or in full. In other words, a person can’t send in extra money each month for a refinanced mortgage payment without being penalized. Transaction fees are also applicable to refinancing since they can wipe out any type of savings during the refinancing process. Points are up front payments on a refinanced loan that have to be made before the refinancing process can begin. Points are a percentage of the total loan amount and more points will result in a lower interest rate.

Home Affordable Refinance Program – Final Details

Most refinanced loans with lower monthly payments or with consolidated debts will usually have higher interest rates. Refinanced loans can also be considered recourse debt and this means that the borrower takes a loan without having any collateral to back the loan amount. Borrowers that fail to make payments under a refinance loan program typically have their homes taken from them by the lending institution or bank that made the loan. This is considered an act of default and is not a part of the foreclosure process.

There are some people who are not eligible to receive help from a Home Affordable Refinance Program. Borrowers who are delinquent on their mortgage payments cannot use this type of assistance. Borrowers whose first mortgage on the home exceeds 125 percent of the current market value of property are not eligible to receive this type of refinancing. Borrowers who have loans that are not owned by a sponsoring institution probably won’t be able to refinance their loans through another lending organization. Borrowers who do not have enough income to afford the new mortgage payments under a refinanced plan are not eligible for this type of assistance. The Home Affordable Refinance Program is arranged by FHFA and various lending institutions and homeowners should contact a financial expert to discuss terms and conditions.

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