Richard K. Barra, Esq.

        Over the past few years, we have all heard and read about magical government programs that promised to rescue distressed homeowners, allowing them to retain their homes, drastically reduce their monthly payments, and live happily ever after. Unfortunately, those mystical promises never seemed to materialize in the real world where lenders didn’t offer the programs, borrowers didn’t qualify for the ones that were offered, or the modifications extended the loan for another ten years, included thousands of dollars in costs, and reduced payments by $20 a month. Real hope, however, now exists for underwater homeowners via the latest Home Affordable Refinance Program (HARP).

        Under the current HARP, underwater homeowners can refinance and significantly reduce their interest rate, resulting in substantial monthly savings. In order to qualify, a homeowner needs to meet the following criteria:

        (1)        The mortgage must be currently owned or guaranteed by Fannie Mae or Freddie Mac;

        (2)        The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009;

        (3)        The current loan-to-value ratio must be greater than 80% (which will be the case with underwater homes);

        (4)        The mortgage cannot have been previously refinanced under HARP (with some exceptions); and

        (5)        The borrower must be current on the mortgage loan, have not been in default in the last 12 months, and not be in foreclosure.

        Under so many of the earlier scenarios, borrowers had to actually be in default before lenders would even talk to them. This program avoids the gut wrenching decision by borrowers to strategically default and also rewards the borrowers who struggled but still managed to make their payments.

        Although the program is not a panacea since principal does not get reduced, monthly payments can be significantly cut in many circumstances, easing the burden on the borrowers and allowing additional time for real estate values to rebound.