Tag: fannie mae

Buying a Home with Student Loan Debt

Buying a Home with Student Loan Debt

In a few short months, thousands of college students across the country will walk across a stage, shake a hand, and graduate from a university with a degree and more than likely… a whole lot of debt. Student loans are often necessary to reach your educational goals, but will they affect your ability to qualify for other financing in the future? Here’s what you’ll need to know.

Qualifying for a Mortgage with Student Loan Debt

How your student loans will affect your ability to qualify for a mortgage depends on two things: the total amount you owe, and what type of home loan program you are applying for. There are many loan programs available today and they each treat student debt differently, by the way they calculate your monthly payment.

FHA & USDA Mortgages and Student Loan Debt

Effective last summer, the FHA and USDA began calculating monthly student loan payments at 1% of the total amount owed. Regardless of deferment or income-based repayment plans, 1% of the total must be used to calculate a borrower’s debt-to-income ratio (DTI).  If a borrower is on a standard repayment plan, and their monthly payment is greater than 1% of the total amount owed, the actual payment amount will be used.

For example, lets say John has $65,000 in total student loan debt, but he is in deferment for 6 months. His monthly payment will be calculated as $65,000 * 1% (.01) = $650 regardless of what he actually pays each month.  If, however, he is on a standard repayment schedule and his monthly payment is $780 per month, his payment must be qualified at $780.

VA Mortgages and Student Loan Debt

Last month, the Department of Veterans Affairs (VA) introduced a new policy regarding how student loan debt is calculated. Prior to this change, it was calculated the same way as FHA and USDA. Now, however, the payment is calculated based on 5% of the total student loan debt, divided by 12 months.

Lets get back to John. In this scenario, John’s payment will be calculated as $65,000 * 5% (.05) / 12 = $271. Under the VA mortgage program, John more easily qualifies, because his DTI is lower.

What if John’s student loans are in deferment? If his repayment is scheduled to begin within 12 months from the estimated closing date, 5% / 12 months calculation must be used. If not, however, the payment can be omitted altogether if written evidence can be provided as such.

Conventional Mortgages and Student Loan Debt

Under Fannie Mae Conventional guidelines, student loan payments are calculated under the same rules as FHA and USDA. Under Freddie Mac Conventional guidelines, however, an IBR payment can be used in place of the calculated amount.

Lets say John is on an income-based repayment structure and only pays $250 per month. John will simply need to provide a statement from his loan servicer showing the actual repayment terms.

Perhaps the best news yet is that our 1% Down Conventional program allows for an actual IBR payment to be used when qualifying a borrower. So, not only can John more easily qualify with a lower DTI, but he can put just 1% down on his home purchase!

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How to Get Rid of Mortgage Insurance

How to Get Rid of Mortgage Insurance

So you want to break up with your monthly mortgage insurance—we don’t blame you! When you purchased your home, there’s a good chance you didn’t have 20% to put down, right? Mortgage insurance is a great option, in that it allows buyers to increase their purchasing power, but comes with an unfortunate side effect of additional monthly fees.

Every situation is different, so it is important to understand your loan, to determine your options for dropping your mortgage insurance. Below are the greatest factors affecting your ability to say “Sayonara” to your mortgage insurance (MI).

• Type of mortgage insurance you’re paying
• Which lender holds your loan
• Age of your loan (time since closing)
• Your loan-to-value ratio (LTV)
• The property type
• Whether or not your property value has increased

Types of Mortgage Insurance

If you’re paying a monthly fee on a conventional loan, it is called private mortgage insurance (PMI). If you paid an upfront fee at close and a monthly fee on an FHA loan, it is called a mortgage insurance premium (MIP).

Who Owns Your Loan?

If you have a Conventional loan, is it Fannie Mae or Freddie Mac? This is important because they have different rules for when MI can be removed. If you have an FHA loan, you will need to know its age and the percentage of down payment you gave at close.

What is Your LTV?

The Loan-to-Value ratio is essentially the financed amount divided by your home’s value, expressed as a percentage. Let’s say for example that you purchased your home for $200,000 with 10% down ($20,000). You financed $180,000 of the $200,000 purchase price, which gives you a loan-to-value ratio of 90%. Your LTV will decrease as you make payments, as well as when your property value increases.

Has Your Property Increased in Value?

If you’ve made considerable improvements to your home, it has probably gone up in value! You’ll need to order a new appraisal to confirm the updated value, which generally costs between $400-$600 out of pocket.

Related: Refinance Your Home Without an Appraisal

Canceling MIP on your FHA Loan

If you closed on your loan on or after June 3, 2013 and you put less than 10% down, MIP can never be removed. With a down payment of 10% or more, you’re still required to pay MIP for a minimum of 11 years. If your loan closed before that date, your MIP will be automatically cancelled when your LTV reaches 78%, but only after you’ve paid the MIP for a minimum of 5 years, and only if you have not had any late payments in the last year. In most cases, the only way to stop paying MIP on an FHA loan is to refinance your mortgage.

Canceling PMI on your Conventional Loan

Ditching the PMI on a conventional loan is easier and more flexible than on an FHA loan. Your MI will be cancelled automatically as soon as your LTV reaches 78% OR when you reach the midpoint of your mortgage (15 years into a 30 year mortgage). Again, you must be current on your payments for the cancellation to occur.

If you pay close attention to your mortgage statements and are anxious to kick your MI to the curb, you can request cancellation once your LTV reaches 80%. It is also important to note that while Fannie Mae allows homeowners to make extra payments to get to 80% LTV faster, Freddie Mac does not.

As mentioned above, if you’ve made considerable improvements to your property, you may be able to remove PMI much sooner. You’ll need to order a new appraisal to document all improvements, but as long as your LTV is below 75% or less (for Fannie Mae) or 80% (for Freddie Mac), your PMI will be removed!

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Conforming Loan Limits Increased

As home prices across the country continue to rise, the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) have announced increases in conforming loan limits for 2017.

For the first time since 2006, the FHFA has increased the maximum loan limit for conventional loans through Fannie Mae and Freddie Mac from $417,000 to $424,100.

Related: 2019 Conventional Loan Limits in Michigan

Conventional Loan Limits Increased

Conforming loan limits for Fannie and Freddie are determined by the Housing & Economic Recovery Act of 2008, which requires that after a period of declining home prices, the baseline loan limit may not rise until home prices return to pre-decline levels. Until this year, average home prices remained below the level of those in the third quarter of 2007—considered the pre-decline price level—so the baseline remained the same. According to the FHFA, the Home Price Index (HPI) value for the third quarter of 2016 was approximately 1.7% above the value for the third quarter of 2007, meaning the baseline loan limit will increase as such.

Related: More about Conventional Mortgage Loan Limits and FHA Mortgage Loan Limits

FHA Loan Limits Increased

Less than a week later, the FHA announced a similar loan limit increase for a whopping 2,948 U.S. counties in 2017. Only 286 counties will remain at 2016 levels. Here in Michigan, the FHA conforming loan limit will rise from $271,050 to $275,665. It will apply to cases assigned on or after January 1st, 2017.

These loan limit increases may seem marginal, but point to a better future. The FHFA and FHA recognize that home values across the nation have recovered, and have responded with an opportunity for homebuyers to increase their buying power.

Some financial institutions have speculated that this 1.7%, $10,000 increase to the conventional loan limit could lead to 40,000 additional originations with $20 billion in loan balances across the country.

Related: One Percent Down Conventional Loan

2017 Loan Limit Summary

  • FHA Conforming Loan Limit $275,665
  • Conventional Conforming Loan Limit $424,100
  • USDA Conforming Loan Limit $424,100
  • VA Conforming Loan Limit $424,100 with zero down payment

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Refinance Your Home Without an Appraisal

Refinance Your Home Without an Appraisal

Soon, homeowners will be able to refinance their homes without an appraisal! Beginning December 10th 2016, Fannie Mae will offer an Enhanced Property Inspection Waiver (PIW) for ONE-IN-FOUR transactions.

What is a Property Inspection Waiver?

A Property Inspection Waiver is Fannie Mae’s offer to waive the requirement for an appraisal on certain refinance transactions. It is unclear at this time whether or not purchase transactions will be offered a PIW, but more information will be released as the launch date approaches.

“When a DU loan casefile receives a PIW offer and it is exercised by the lender, Fannie Mae accepts the value estimate submitted by the lender as the market value for the subject property.” -Fannie Mae

To exercise a PIW offer, the lender must provide a Special Feature Code and the borrower must pay a $75 fee at time of loan delivery to Fannie Mae. This $75 PIW fee provides a desirable alternative to traditional appraisals, which carry an out-of-pocket cost of $400-$600 to the borrower.

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Related: Refinance your FHA mortgage without an appraisal 

What is the Benefit of a Property Inspection Waiver?

The Enhanced PIW provides many benefits to both the lender and the consumer, such as:

  • Provides a lower-cost alternative to a traditional appraisal
  • Shortens the loan origination process by removing the need to review an appraisal
  • Eliminates the expense of appraisal-related delays

Who Will Receive a Property Inspection Waiver?

Fannie Mae will use proprietary analytics and a large database of appraisal reports to determine the minimum property value for new loans. Not all transactions will receive a PIW offer—some will still require an appraisal to determine market value.

“PIW offers are issued through Desktop Underwriter® using Fannie Mae’s database of more than 20 million appraisal reports in combination with proprietary analytics from Collateral Underwriter® to determine the minimum level of property valuation required for loans delivered to us.” -Fannie Mae

What Transactions Are Eligible for a Property Inspection Waiver?

  • Single-Family Properties and Condominiums
  • Principal Residence, Second Home, and Investment Properties
  • Limited Cash-out Refinances up to 90% LTV (principal residences)
  • Cash-out Refinances up to 70% LTV (principal residences)
  • Approve/Eligible Casefiles

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

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To apply for a Renovation Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Fannie Mae HomeReady Mortgage Program

home ready97% mortgagePartnering with one of the nation’s largest conventional mortgage lenders, Riverbank Finance is now offering Fannie Mae’s new 3% down home loan program called the HomeReady Mortgage, which allows borrowers to obtain a mortgage with substantially lower payments that standard conventional home loans. For a home purchase or even a mortgage refinance, this new home loan option removes Fannie Mae price adjustments which keeps mortgage rates low.

Related: Michigan HomeReady Mortgage Financing

This program is targeted at low to medium income families to make homes more affordable and sustainable. Income limits are imposed based on AMI (Area Median Income) however there are no income limits in many census tracts such as underserved urban areas.

To be eligible for this program a home buyer must apply for a mortgage with less than 20% down payment and 680+ credit score. Qualified borrowers will be able to get some of the lowest overall mortgage payments compared to standard conventional loans and FHA loans (another popular low down payment mortgage).

What makes this program unique is that it will consider income from others that are planning on living in the home such as parents, siblings, working children or even roommates without them being a co-borrower on the mortgage. This feature will be especially helpful for families that choose to live with multiple generations for health reasons or for financial savings.

HomeReady Mortgage Program Highlights:

  • No Fannie Mae pricing adjustments on loans greater than 80% LTV (loan to value) with credit scores 680+
  • Not limited to first time home buyers
  • Available for non-Fannie Mae Refinancing loans up to 95% LTV
  • Non-Occupant Co-borrowers are permitted up to 95% LTV (parent co-signers)
  • No income limits in many census tracts
  • Gift funds are acceptable for the entire down payment

To request a free quote for a HomeReady purchase mortgage or HomeReady refinance mortgage call Riverbank today at 800-555-2098 or request information below.

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Updates for Fannie Mae Conventional 97% Mortgage Loans

Fannie Mae Logo

FANNIE MAE CONVENTIONAL 97% MORTGAGE LOANS

A Conventional 97% mortgage loan is a Fannie Mae home loan that allows homeowners to purchase a home with only a 3% down payment. It is a great misconception that all conventional mortgage loans require a 20% down payment however many options for alternative financing do exist with low down payments or even no down payments.

The Conventional 97% Mortgage is Back!

The 3% down Conventional mortgage is now back through Fannie Mae’s My Community Mortgage® as well as for standard conventional loans. This program is designed for first time homebuyers that may not have the resources for a large down payment. At least one of the borrowers on the loan must be a first time home buyer in a purchase transaction. The  My Community Mortgage® program is only available for low to moderate income families and may require home buyer education prior to loan closings. The standard conventional mortgage is also designed for first time home buyers but does not have income restrictions.

Related: Fannie Mae HomeReady 97% financing

97% refinance loans will also be made available for those who do not qualify for a HARP refinance but have loans owned by Fannie Mae (see Fannie Mae Loan Lookup tool to confirm eligibility). This high LTV refinance program will be available only as a limited cash-out option which allows a borrower to simply change their interest rate or mortgage term.

Update on the Conventional 97% Mortgage from Fannie Mae Announcement

Announced on December 8th, 2014 Fannie Mae will reinstate the 3% down mortgage program. Fannie Mae’ Executive Vice President Andrew Bon Salle explains,  “This option alone will not solve all the challenges around access to credit.  Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage.  We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”

Read: Fannie Mae’s Announcement on 97 Percent LTV Option for First-Time Homebuyers

Alternatives to Conventional 97% Mortgage Financing

If a borrower does not meet the eligibility requirements for a Conventional 97% Mortgage, homebuyers may need alternatives for low down payment home loans. One great options is the FHA mortgage program which still only requires a 3.5% down payment.

FHA Mortgages have been very popular over the past several years as they are more flexible on credit and qualifying after bankruptcies and foreclosures. FHA loans also may allow for family members or close friends to gift the down payment.

That’s right, a borrower can buy a home with none of their own money out of pocket which may be limited on 97% Conventional financing. Closing costs may also be paid by the seller with a limit of 6% of the home’s purchase price while Conventional loans limit seller paid closing costs (Seller concessions) at 3%.

Conventional 97 Mortgage Alternatives: USDA Rural Development Loan

Another low down payment mortgage alternative may be the USDA Rural Development Loan which is a no down payment mortgage with 100% financing. While the USDA option may be great to consider, there are downsides.  Currently many USDA field offices are caught up on loan application and are approving Rural Development loans very quickly however at times they do get several weeks behind before reviewing applications.

One major factor of this loan option is that the home must be in a rural area. The USDA guarantee this home loan type to help grow rural communities therefore the location of the home cannot be in a largely urban area (see the USDA’s eligibility website for more information).

USDA Rural Development Loan Benefits:

  • Zero Down Mortgage
  • Lower Mortgage Insurance Premiums (PMI)
  • Government Guaranteed Mortgage Loan
  • Easier to Qualify for than the Conventional 97 Mortgage
  • Lower Mortgage Interest Rates

Conventional 97 Mortgage Alternatives: Conventional 95 Mortgage Loans

Lastly, the Conventional 95% mortgage loan is another great alternative to the Conventional 97% mortgage loan. Not everyone will qualify for the 3% down payment mortgage including those that are not first time home buyers or make too much money for the My Community Mortgage®. With a couple of quick yard sales and postings on craigslist you may be able to come up with the extra cash for a 5% down payment which may offer better financing terms. While only 3% down sounds great, you will be much happier with the lower interest rates and Mortgage Insurance Premiums (PMI) that just a bit more cash will bring.

Conventional 95 Loan Benefits:

  • Low Down Payment Mortgage with only a 5% Down Payment Requirement
  • Lower Mortgage Insurance Premiums (PMI)
  • Government Guaranteed Mortgage Loan
  • Easier to Qualify than the Convention 97 Mortgage
  • Lower Mortgage Interest Rates
  • More Lenders participate in Conventional 95 Financing

Apply for Low Down Payment home loans like Conventional 97% Mortgage Financing

Riverbank Finance would be more than happy to help you review your low down payment home loan options. Apply now for a Conventional 97% mortgage or My Community Mortgage® for first time homebuyers and buy a home with only a 3% down. Call us today at 800-555-2098 or submit a request below for additional information.

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Top 9 HARP Refinance Myths for Fannie Mae and Freddie Mac Home Loans

Harp mortgage refinance program.With over 2.9 million homeowners refinancing with the Home Affordable Refinance Program (HARP), there are still many people that are not taking advantage by refinancing their homes. There is a variety of reasons in which these homeowners are choosing not to drop their home loan rates with a mortgage refinance. Many of these reasons are simply myths or assumptions that are made based on their prior knowledge of the refinance process. Tracy Mooney, Vice president of Single-Family Servicing and Real Estate Owned (REO), has taken the time to publish an article debunking these top HARP Myths.

HARP Myth 1: I’ve had my loan for many years, and with HARP I’d have to start all over again with a 30-year mortgage.

Answer:  This is incorrect. Borrowers that have had a conventional loan for several years are able to do a HARP refinance and shorten their term. Many borrowers choose to go with a 15 year or 20 year loan and reduce their interest rates while taking several years off their mortgage. A borrower may be able to accomplish this and keep their payment the same as their current 30 year mortgage.

HARP Myth 2: I’m receiving too many solicitations to help me refinance. They must be scams.

Answer: There are several mortgage companies and banks that offer HARP refinancing so these offers may all be legitimate. It is important to note, however, that not all banks and mortgage companies are equal. Most lenders have overlays on top of HARP Eligibility Requirements that prevent them from doing the refinance loan. If you have tried one company and been turned down, it is recommended that you check with another company that may offer programs such as unlimited LTV loans, lower minimum credit scores and both Fannie Mae HARP mortgages and Freddie Mac HARP Mortgages.

HARP Myth 3: I am really underwater on my mortgage. HARP can’t be for homeowners like me.

Answer: HARP has been updated several times since its inception in 2009. Currently both Fannie Mae and Freddie Mac loans allow for unlimited Loan-to-Value (LTV) refinancing. As noted previously, most banks and lenders have overlays and limits for their LTV. It is important to find a mortgage lender that offers higher level LTV refinances for homeowners severely underwater on their home loan.

HARP Myth 4: I recently lost my job, so no one is going to help me refinance through HARP.

Answer: If you have recently lost your job you may still be able to get a lower rate with HARP. Your current mortgage servicer may allow for a HARP Refinance without income in some situations but most lenders will allow you to income qualify using a co-borrower. One of the original borrowers must remain on the loan to qualify. The combined income is what will be used to calculate the Debt-to-Income (DTI). Alternatively, if you have available funds equal to at least 12 months of principal, interest, taxes, and insurance, then you may be eligible without proving income.

HARP Myth 5: My lender doesn’t offer HARP, so I can’t refinance through the program.

Answer: Yes; you may be eligible to refinance through any other mortgage company that offer the HARP Mortgage Program.

HARP Myth 6: My lender doesn’t offer HARP, so I can’t refinance through the program.

Answer: Yes; you may be eligible to refinance through any other mortgage company that offer the HARP Mortgage Program.

HARP Myth 7: I have an adjustable-rate mortgage (ARM), so I am not eligible.

Answer: HARP was created to offer more stable and sustainable mortgage options for homeowners in your very situation. Speak with your loan officer about fixed rate mortgage loans to have long term stability in your payments. Alternatively, you may utilize HARP to extend your adjustable rate mortgage (ARM) for an additional 5 or 7 years at lower rates.

HARP Myth 8: I don’t have enough cash to pay closing costs, so I can’t refinance through HARP.

Answer: Event with a HARP refinance, you may be able to refinance with little or no money out of pocket.  For many homeowners, you may be able to roll any closing costs and pre-paid items such as taxes and insurance into your new mortgage. Some lender may also offer options to credit back money to help cover the expenses of closing costs so you truly have a no cost mortgage. Be sure to speak with your loan officer to review what loan options you are eligible for through HARP.

HARP Myth 9: HARP is only for homeowners who are behind on their payments and in danger of foreclosure.

Answer: The Making Home Affordable program offered two home loan solutions for borrowers that were at high interest rates and were previously unable to refinance. The Home Affordable Modification Program allows homeowners that were behind on their loan payments to apply for a modification of their current terms to allow them to save on their payments. This is commonly confused with the Home Affordable Refinance Program (HARP) which is for clients whom have paid their payments on time and would qualify for a conventional refinance if they did not owe more than their house was worth. The HARP program is for borrowers with good credit that simply want to lower their interest rate and payments.

For more information on the HARP refinance program call a licensed loan officer at Riverbank at 800-555-2098 or request information below:

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HARP Refinancing Beat 2012 Estimates

HARP refinance chart

HARP refinance chart courtesy of Housingwire.com

HARP refinancing beat 2012 estimates with nearly 1.1 million loans closed last year.  Fannie Mae and Freddie Mac released a report for the Federal Housing Finance Agency confirming last year totaled nearly half of the 2.2 million loans completed since the HARP program was announced in 2009.The majority of homes were primary residences with 1.89 million while 69,522 others reduce their payments on second homes and 199,672 dropped their rates on investment properties.The states with the most HARP refinance loans since 2009 were California with 301,327 refinances, Florida with 175,686, Illinois with 147,252, and Michigan HARP Refinance loans rounding up the top HARP states with 144,709 loans completed.

Underwater mortgages can benefit through the HARP program to reduce their mortgage rates and terms by completing a refinance. Most borrower do not need an appraisal even if it is concluded that they owe significantly more than their home is worth.  Some lender add overlays limiting the loan to value ratio at 125% while other allow Unlimited LTV HARP Refinancing.  This means that even if your house is valued at $100,000 and you currently owe $200,000 (200% LTV) you would still be able to qualify if you are working with the right lender.

 

Fannie Mae and Freddie Mac Loan Lookup Tool

Lookup Owner of Your Home LoanThe Home Affordable Refinance Program (HARP) is a great opportunity for those homeowners who have found themselves in a sticky situation.  Anyone who is in an “underwater” situation with their mortgage, HARP was developed to solely help those people.  With extremely “relaxed” guidelines, it’s possible for the majority of homeowners to take full advantage of a program that could help potentially retool their lives by relieving the mass amount of stress being “underwater” brings along.  Before anyone can take advantage of the program, they must meet the standing guidelines.  Though they may be easy to meet, people should still be aware of the biggest guideline in place.  That they’re mortgage loan must be owned or guaranteed by either Fannie Mae or Freddie Mac.

How can you determine what company may own your loan though?  There’s actually a fairly simple way to search Fannie Mae and Freddie Mac databases to know if you meet the HARP guideline.  First up, we will check with the Fannie Mae databases.  First you need to head on over to their loan lookup tool, which will open in another window/tab.  From that point on, just follow the on screen information and enter the data required.  Once that is done, a message will come back either possibly confirming or denying the loan’s status on that property.  Now with Fannie Mae, they don’t guarantee the information is full proof meaning you may have to go to other measures they suggest in order to confirm the status of the loan.

The process with Freddie Mac is a bit more intensive but will lead you to a potential answer that you’re looking for.  Click on over to their loan lookup tool and again, just follow the on screen criteria.  Once you have entered all the necessary information, you’ll then know if you can qualify for the Home Affordable Refinance Program.

One last piece of criteria you need to be sure of is the sale date of your mortgage loan.  The HARP guidelines state; if your loan was sold to either Fannie Mae or Freddie Mac on, or anytime, after June 1, 2009.  You cannot take advantage of the program.

Now of course there are other guidelines for HARP so be sure to review that information.  If you would like to receive some help regarding the HARP program; either call us at 1-800-555-2098 or fill out the email form below.

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