The Obama refinance plan is found under a broad collection of services that deliver mortgage relief through the Making Home Affordable Program initiative. Besides refinancing, the services help the homeowner avoid foreclosure and offer alternatives to those homeowners who are unemployed or who owe more than their homes are worth and have hardship difficulty making payments.

The refinance plan is administered under the Home Affordable Refinance Program. HARP mortgage assistance enables homeowners to take advantage of present low interest rates and refinance their mortgage rates to lower levels. HARP was revamped in November 2011 as HARP-2 to allow more distressed homeowners to qualify for refinancing through December 31, 2013.

To qualify for HARP, the mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. These once government-owned agencies own over half of all the country's mortgages. Under the Obama refinance plan, the homeowner's mortgage must have been acquired by Fannie Mae or Freddie Mac on or before May 31, 2009.

The current loan-to-value ratio of mortgage to property must be 80 percent or greater. If the homeowner has an adjustable-rate mortgage, the LTV can be figured as high as 105 percent. The interest on the ARM must be at a fixed-rate for the initial five years.

The homeowner must be current on the mortgage and must be seeking refinancing for his or her principal residence. The homeowner must have demonstrated commitment by having no late payment over the last six months and no more than one late payment over the last year.

If there is private mortgage insurance on the present loan, it will be transferred to the refinance. The Obama refinance plan also applies to homes that have decreased in value but serviced by Fannie Mae and Freddie Mac. They are designed to control falling equity.

The applicant must show an ability to pay, preferably over a long term. The principal rate will not be reduced; the purpose of the Obama refinance plan is to settle the homeowner’s finances into a stable fixed-rate loan plan, unlike the unregulated ARMs and balloon plans that had led to the housing bust.

Applicants to HARP will be supplied with “Good Faith Estimate” and “Truth in Lending Statement” documents from the lender. These statements should show the total amount paid over the life of the loan, the new interest rate and the mortgage rate.

Want to learn more about this option for helping underwater homeowners? Click the button below to talk to a HARP specialist at AmeriFirst Home Mortgage today.