The Home Affordable Refinance Program and Remodeling

Posted by Woodrow Aames ~ October 30, 2011

The federal government has enacted changes to The Home Affordable Refinance Program (HARP) that may assist about one million troubled homeowners to qualify for refinancing. The jury is out whether sparing so many homeowners from losing their homes to foreclosure will positively impact the economy, but for our purposes, I wonder whether the elimination of the loan-to-value cap on borrowers may spark hope for the home improvement sector.

Photo by Mortgage Protection Insurance

In brief, the revamping of mortgage refinancing rules as reported this week by Yahoo Finance will eliminate costly barriers to borrowing for homeowners who have kept current on their payments.

The modifications include the removal of the 125% loan-to-value cap, removal of appraisal requirements for homes meeting Fannie and Freddie requirements, and loan fee reductions for homeowners who restructure borrowing to a shorter-term mortgage.

Saving homes and remodeling

Sacramento Today reports that HARP is being extended through 2013 to benefit the most amount of homeowners. With the new regulations, homeowners are expected to save $2,500 a year on their payments. The administration, according to the report, hopes the savings will pump more money into the economy. Timing of the refinancing plans may vary by lender.

According to The Washington Post, the pre-existing HARP program "reached less than one-tenth of the 5 million borrowers it was designed to help." You won't be eligible to qualify for the revamped HARP if you have already received HARP assistance or if you've missed a payment in the last six months. You also won't qualify if you have an FHA, VA or USDA loan.

If you're among the qualifiers (your mortgage is owned by Fannie Mae or Freddie Mac), I wonder if you'll find ways to pump the savings into improving your home or remodeling it to make the property more competitive in the slumped market? Removing the loan-to-value cap may help those who found themselves underwater, owing more than 125 percent of what their property is worth.

According to Post writer Zachary A. Goldfarb, "Economists increasingly say that Americans are too scared to spend money, depriving the economy of its traditional engine of growth." Which may, finally, make it clear that even with a boost in savings on mortgages, homeowners may remain skeptical about pumping any funds into general remodeling or home improvement projects.

What would you do?

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