What is the Obama House refinance plan?

The Obama administration brings further relief to struggling homeowners with and extension  of the Obama house refinance plan formally known as the Home Affordable Refinance Program (or HARP as of December 2011 - HARP 2.  It was designed to help underwater homeowners to refinance their home – and save money on their monthly mortgage payments. Refinancings through the Home Affordable Refinance Program (HARP) increased 26 percent in the third quarter of 2010, and by the end of 2011, the program had helped over 900,000 homeowners to lower their payments.

The Obama refinance program has been extended as of October 2011 to make several million more Americans eligible to benefit. The revised program eliminates LTV limits to allow eligible borrower to refinance even above the orginal 125% LTV limit.

Normally if your house is worth less than the loan amount, it is not possible to refinance because lenders don’t want the risk of a collateral (home) that won’t cover the loan in the event of a default.  In fact, it is difficult to refinance even if the loan is more than 80% of the home’s value.  The historically common 20% down payment provides just such a cushion for the lender with regard to the loan vs. property value.

When a borrower does take out a loan with high 80% LTV or greater, the homeowner has to pay for mortgage insurance (PMI).  PMI adds to your monthly payment, and in some circumstances, eliminates the value of the lower rate you achieved by refinancing.    Obama’s HARP program tries to eliminate as many hurdles as possible that might prevent a homeowner from lowering payments and staying in their home.  The goal of Obama’s refinance plan – using HARP, is to keep homeowners in their homes, keep money in the pockets of consumers, and to support the U.S. housing market along with Fannie Mae and Freddie Mac portfolios.

If you are interested in refinancing your loan, see the HARP Guidelines or click GET STARTED and we’ll help you to determine if you are eligible.

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