Is There a HARP in Your Divorce?

Today's post is from Delores Moore, a Home Mortgage Consultant with the Wells Fargo Home Mortgage Office in West Palm Beach.

You may have heard in the news recently that several new mortgage refinance programs have been released through the Federal Stimulus package. These programs  -- called the Home Affordable Refinance Program (HARP) - will no doubt be very instrumental in helping struggling home owners restructure their housing debt with more long-term manageable loans. Please note that only individuals whose existing mortgage is owned by either Fannie Mae or Freddie Mac will be eligible for these programs.

 

The guidelines for these refinances are uniform across the industry, and have some unique characteristics and requirements that could impact divorcing couples who need of mortgage relief.  In an effort to help empower you with the knowledge to make a sound decision, I have itemized below a few of the specific parameters of these programs that will directly impact any refinance of your marital home.

 

• RATE/TERM REFINANCE ONLY – The customer can only rewrite the existing balance of their first mortgage. They can not combine an existing 1^st and 2^nd mortgage into a new single loan amount.  They can not take out any cash, even if the purpose of that cash is to pay off a former spouse. Any existing 2^nd lien must be subordinated. 

• LOAN PARTIES ON THE REFINANCE –  In short,  additional parties can be ADDED to a loan (the new spouse, for example), but never can any parties be REMOVED as a result of the refinancing, even if

new additional parties are being added, even if the parties are no longer married.  There are very rare and isolated circumstances that may or may not influence this. But they are quite rare. If you feel like your client may possibly be impacted, they should contact their current lender for clarification. But please do note that the odds of any change are very slim.

• CLOSING COSTS – Depending on which of the 3 available programs apply, either all of the closing costs or as little as $2500 may be rolled into the new loan. Contact the existing lender to know which will apply.

• LOAN TO VALUE – Worst case scenario, 105% of current value is the limit, and appraisals may or may not be required. Contact the current lender to determine. Maximum loan amount regardless of LTV is $417,000

• REFINANCING WITH ANOTHER LENDER – Under these programs, the customer is required to use their existing lender. The only exception to this would be when the existing loan is owned by Fannie Mae. In that case, another lender may be used.  Individuals with existing Freddie Mac loans would be required to use their existing lender.

• EMPLOYMENT & INCOME – Employment is necessary, but income level may not be an issue as long as the new payment is within 20% of the old payment.

• CREDIT & MORTGAGE HISTORY – May not be an issue as long as the new payment is within 20% of the old payment. Recent mortgage payment history may also impact this. 

 
I know these are challenging economic times for everyone. Individuals experiencing divorce have even more obstacles to overcome. You can Contact Delores at the Wells Fargo Home Mortgage Office in West Palm Beach for additional information. I hope that this information will be helpful to you in making decisions regarding existing mortgages in your Florida divorce.