Smallwood Homeowners Can Refinance Under HARP 2.0 Even If House is “Underwater”.
By Myron Rock

As most of us know the recent real estate market downturn has limited refinancing existing mortgages because current house appraisals can put Smallwood homes way their current loan values owed to the bank.
Suppose your mortgage far exceeds your home's value. Additionally, the interest rate and resulting payments are much higher than they could be at 4 -5 percent or less -- the current rates.
If Fannie Mae or Freddie Mac holds your mortgage and you have made your payments on time and merely confirming that you are employed meets the underwriting requirements for HUD's revised Home Affordable Refinance Program, known as HARP 2.0
To find out if Freddie or Fannie holds your mortgage, and get more details about HARP 2.0, go to http://www.fhfa.gov/webfiles/22721/%20HARP_release_102411_Final.pdf.
"The biggest change will allow some homeowners to refinance their homes, even though they owe more on their existing loan than their homes are worth," wrote John Adams, a Georgia-based real estate investor and columnist.
Appraisals will not be required because there are no loan-to-value ratio limitations. But instead of HARP helping struggling homeowners who are delinquent on their mortgage payments, HARP 2.0 "is targeted at so-called responsible borrowers who are current on their payments and have not been more than 30 days late in the past 12 months," Adams said.
In other words, homeowners and investors who have demonstrated they do not intend to default will be permitted to refinance at lower interest rates. By contrast, many others have walked away from their obligations, primarily because they have negative equity in their homes.
Freddie and Fannie are the only mortgage holders offering HARP refinancing to current mortgagors. You will recall that Freddie and Fannie used to be federally chartered, stockholder-owned, government-sponsored entities until they went belly up. They made bad loans, became insolvent and were seized by regulators. Now under conservatorship, these wards of the federal government are costing taxpayers hundreds of billions of dollars each year and there is no end in sight.
Meanwhile, the good citizens who are making payments on time for Freddie and Fannie-owned mortgages are encouraged to refinance at lower rates. While it is a windfall for the borrowers, it means that less interest will be paid to Freddie and Fannie. That decreases their earnings and you and I will subsidize their losses through our taxes.
Adams said there is another, not-so-obvious cost to taxpayers. Lenders who refinance loans under HARP 2.0 will be relieved from liability of faulty underwriting or fraudulent processing incurred during the origination of the loans being refinanced and will not be asked to buy them back.