Making Home Affordable
REFINANCE AND LOAN MODIFICATION PROGRAM

What is the Home Affordable Refinance Program?
Am I eligible?
What benefits will I get?
How do I apply?

What is the Home Affordable Modification Program?
Am I eligible?
What benefits will I get?
How do I apply?

What is the Home Affordable Refinance Program?

The Home Affordable Refinance Program (HARP) is a federal program that makes it possible for homeowners with little or no equity in their homes to refinance their mortgage loans at lower rates to save money. It is a temporary program, scheduled to end on June 10, 2011.

Mortgage interest rates are currently very low. Homeowners can potentially save thousands of dollars per year by refinancing to lower interest loans. Many homeowners do not qualify for refinancing, however, because the drop in housing prices has left them with too little equity in their homes. Lenders do not usually approve refinancing for homeowners with less than 20% equity.

Home Affordable Refinancing allows homeowners who lost equity when their homes dropped in value to take advantage of low interest rates. The program is for homeowners with satisfactory credit who have been making their loan payments on time.

Am I eligible?

You may be eligible for the Home Affordable Refinance Program (HARP) if:

• you live in your home as your primary residence. Your home can be single-family or multi-family, up to four units.

• you have a Fannie Mae or Freddie Mac loan
  
  If you don't know who owns your loan, you should contact the company that sends you your monthly mortgage bill. The phone number should be on your mortgage statement. You can also call Fannie Mae and Freddie Mac:

  • Fannie Mae: 1-800-7FANNIE or check online at Does Fannie Mae Own Your Mortgage?
    (See Fannie Mae Loan Lookup FAQs for answers to commonly asked questions)
     
  • Freddie Mac: 1-800-FREDDIE or check online at Does Freddie Mac Own Your Mortgage?

• you are current on your loan. You are current on your loan if you have not been more than 30 days late on your mortgage payments in the past 12 months.

• the amount you owe on your first mortgage is no more than 125% of the current value of your home. For example, if your home is worth $100,000, you owe no more than $125,000 on your mortgage.

  If you don't know the value of your home, you can get a free online estimate at Zillow or Cyberhomes. Zillow and Cyberhomes are popular commercial web sites that give quick estimates of property values. (Note: To be approved for refinancing, you will need an official appraisal of your home's value.)

• you have steady income and can afford the new mortgage payments

For more information about eligibility, see Am I Eligible for a Home Affordable Refinance? on the U.S. Treasury web site.

What benefits will I get?

With Home Affordable refinancing, you can refinance to a 30-year or 15-year fixed rate loan at current market interest rates. Your monthly payments might be lower or higher than your current payments, but you will save money over the term of your loan.

If your current loan is a fixed rate loan at a much higher interest rate, your monthly payments will go down and you will start saving money right away. If your current payments are low because of an introductory rate or because you are only paying interest, your monthly payments may go up, but they will not increase later.

You will not be required to buy any additional mortgage insurance.

You must pay any points or other fees charged by your lender, but you may be able to include these costs in the refinance amount.

Interest rates and closing costs may vary from one lender to another and from one day to the next. If you have a Freddie Mac loan, you must refinance with your current lender. If you have a Fannie Mae loan, you can shop around for the best deal, as long as you choose another Fannie Mae approved lender.

How do I apply?

To apply for Home Affordable refinancing, you should contact the company that handles your current mortgage loan. The phone number should be on your monthly mortgage statement. For Fannie Mae loans, you can also contact other Fannie Mae approved lenders to find the best loan for you.

When you apply, you will need to provide information about monthly household income; second mortgages or equity loans; credit card debt; other debts (car loans, student loans); and a copy of your most recent tax return.

What is the Home Affordable Modification Program?

The Home Affordable Modification Program (HAMP) is a foreclosure prevention program to help homeowners who cannot afford their monthly mortgage payments. Under the program, mortgage providers modify loans by lowering the interest rate or taking other steps to make them affordable. Homeowners pay no more than 31% of their monthly household income for their modified loan payments.

The government pays mortgage providers a fee for each loan they modify, and also shares the costs of reducing the monthly payments. In addition, the government gives financial incentives to mortgage providers and to borrowers when payments are made on time.

Home Affordable modifications are free to homeowners. The government and the mortgage providers share the costs. The program is scheduled to end on December 31, 2012.

Am I eligible?

You may be eligible for the Home Affordable Modification Program (HAMP) if:

• you live in your home as your primary residence. Your home can be single-family or multi-family, up to four units.

• you owe no more than $729,750 on your first mortgage for a single-family. The limit is higher for multi-family homes.

• your monthly payment on your first mortgage, including principal and interest, property taxes, house insurance, and homeowner's fees, is more than 31% of your household's gross monthly income

• your loan is not affordable because of financial hardship and you do not have enough liquid assets to make your payments. The hardship can be a decrease in income, an increase in expenses, a jump in your mortgage payments, or other financial hardship.

• you got your current loan before January 1, 2009

• your loan provider participates in the program. Any mortgage provider that accepts bailout money from the U.S. Treasury is required to participate. For other lenders, participation is voluntary. However, all major lenders are expected take part because of the financial incentives they will get.

You do not have to be behind in your mortgage payments to qualify for a modification. The program is for homeowners who will be at risk in the near future, as well as those already in trouble with their loans. If you are in foreclosure, the foreclosure will be suspended while your lender checks your eligibility.

If your total monthly expenses (modified mortgage, second mortgage, credit card debt, car loans, student loans, child support, etc.) are very high compared to your income, you must agree to get homeowner counseling from a HUD-approved counseling agency before you will be approved for a Home Affordable modification.

For more information about eligibility, see Am I Eligible for a Home Affordable Modification? on the U.S. Treasury web site.

What benefits will I get?

If you qualify for Home Affordable Modification, you will get these benefits:

• You will get a modified loan with affordable monthly payments (no more than 31% of your gross monthly household income). Your payments will include your mortgage principal and interest, real estate taxes, insurance, and homeowner fees.

• To make your monthly payments affordable, your mortgage provider will lower your interest rate, to as low as 2% if necessary.

• If lowering the interest rate is not sufficient to make your payments affordable, your lender may also:

  • extend your loan to 40 years
  • defer payment on a portion of your loan with no interest. Your payments are based on the remaining principal. You still owe the deferred portion, but don't have to pay it back until you pay off your loan, refinance, or sell your house.
  • forgive part of your debt (this is optional) 

• Your lender will give you a 3-month trial period to see if you make your new payments on time. If the trial is successful, your payments will be fixed at the new rate for at least five years.

• If you have a below market rate, your interest rate can go up 1% per year after five years, but can never go higher than the market interest rate that was in effect when your loan was modified. Otherwise your rate is fixed at the modified rate.

• For each mortgage payment that you make on time, you earn a Pay-for-Performance Success Payment from the government. These payments lower your principal balance. The government will pay up to $1000 per year for up to five years, for a total of $5000. You must stay in the program at least one year before the payments are applied to your loan.

• If you have a second lien on the property, you may be eligible for the 2nd Lien Modification Program (2MP). 2MP will give a payment to mortgage servicers and investors who agree to lower the interest rate, extend the mortgage, or defer or forgive all or part of second lien debt for eligible borrowers. For more information, see 2nd Lien Modification Program (2MP) on the MakingHomeAffordable.gov web site.

• The loan modification does not cost you anything. HUD-approved homeowner counseling is also free. Any unpaid late fees that you may have are waived.

How do I apply?

One way to apply for a Home Affordable loan modification is to call your mortgage servicer directly. The phone number should be on your monthly mortgage statement. When you apply, you will need to provide:

• proof of your household's monthly income and assets
• second mortgage or equity loan documents
• information about credit card debt and other debts (car loans, student loans)
• a copy of your most recent tax return
• an explanation of your financial hardship

Another way to apply is by mail. Simply follow the steps listed at Request a Home Modification on the government's Making Home Affordable web site. Links for all of the forms and checklists you need are on that page. The steps are:

1. Fill out a Request for Modification and Affidavit form
2. Fill out tax Form 4506T-EZ allowing the IRS to give a copy of your most recent tax return to your mortgage servicer
3. Collect proof of income documents
4. Send all the forms and documents to your mortgage servicer

Your mortgage servicer's address should be on your monthly mortgage statement. If it is not, you can find the address at Contact Your Mortgage Servicer on the Making Home Affordable web site.

Participation in the Home Affordable Modification Program is voluntary, but most mortgage providers take part.

Your mortgage company will check your eligibility and determine what modifications (lower interest rate, 40-year term, forbearance, or forgiveness) are needed to make your payments affordable. The mortgage company will add up the costs of the modifications, taking into account the money the government will contribute. If the modifications cost less than foreclosure, you will qualify for a Home Affordable modified loan.

If you do not qualify for a Home Affordable modification, you should ask your mortgage servicer about other options. You can also call the Homeowner’s HOPE Hotline at 1-888-995-HOPE to speak to a foreclosure prevention counselor. For more information, see Foreclosure Prevention Programs.