Wes Moss: Underwater on your home? No problem

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

One upside to the current economic upheaval is that mortgage rates have fallen to their lowest levels in recorded history. Unfortunately, many homeowners who would love to take advantage of this situation by re-financing their homes are unable to do so because they are “underwater” on the property – they owe more on the house than it’s worth in the current market.

Sound familiar? If so, the federal government’s new and improved Home Affordable Refinance Program (I’m calling it HARP 2) might be the answer. Under traditional re-fi standards, applicants typically need at least 20 percent equity in the property in order to re-finance. HARP 2, using the power of Washington, D.C., eliminates that requirement for homeowners. Based on the available information about the program (the full details are not due out until Nov. 15), there appears to be no equity requirement at all. You can be as underwater as the Greek government and you might still be eligible for HARP 2.

Qualifications for HARP 2:

• You must be current on your payments for the past six months, and have no more than one late payment in the past 12 months.
• The mortgage must currently be held by Fannie Mae or Freddie Mac, and must have been “sold” to Fannie or Freddie prior to June 1, 2009. Remember, your lender probably sold your mortgage shortly after you closed on the house. Call your mortgage service provider – whoever you send your payments to every month –- to determine if Fannie or Freddie owns your loan.
• You cannot have already used the original HARP program to refinance the property.
• Vacation and second homes are included in the program.
• Your refinance loan needs to “conform.” In Georgia that means it must be less than $417,000. In other states that number is as high as $625,000. Click here to find your conforming limit.

Estimates vary on how many people the program could help. Some economists predict a small impact on as few as 200,000 borrowers. The Obama administration claims one million homeowners could benefit. The economic masterminds at Moody’s Analytics project as many as 1.6 million re-fi’s under HARP 2.

Based on my conversations with local mortgage lenders, real estate brokers and homeowners, I think the number will be on the high side of those estimates.

Are you underwater? How deep? Will you look into HARP? Would you have a philosophical problem taking “government help” on your mortgage?

– By Wes Moss, for Atlanta Bargain Hunter

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