Many San Joaquin County borrowers are affected by stagnated or depreciated equity.

The Harp 2.0 Refinance Program is designed to refinance borrowers whose mortgages are underwater — those who owe more on a home than the home is worth.

The Home Affordable Refinance Program was announced in March 2009. It was designed by the government to help 5 million underwater or equity-challenged

borrowers nationally.

In October 2011, in an effort to help more borrowers, the loan-to-value criteria was lifted and is now unlimited.

Why it’s needed in San Joaquin Valley

In Stanislaus and San Joaquin counties, at least 60 percent of mortgages are underwater.

News sources indicate that in San Joaquin County, 62.4 percent of borrowers owe more than their homes are worth. Compare this with Stanislaus County, where the rate is 60 percent.

This also increases short sale and foreclosure rates.

Nationally, the underwater rate is 23 percent — for all of California, 33 percent.

Who qualifies for Harp 2.0 loans

Those who qualify to refinance through Harp 2.0 have mortgages that were purchased by Fannie Mae or Freddie Mac by June 1, 2009.

Credit requirements may allow one mortgage late in the past 12 months, but none in the past six months. Borrowers must be current on their mortgages.

Freddie Mac is the Federal Home Loan Mortgage Corp., sometimes abbreviated FHLMC. It was created by the Emergency Home Finance Act of 1970 to create a secondary market for home mortgages. It packages these into mortgage-backed securities and resells them to investors.

Fannie Mae is the Federal National Mortgage Association.

Benefits of Harp 2.0

Refinancing with Harp 2.0 can put more money in the pockets of qualifying borrowers by providing a lower interest rate.

Those who have adjustable mortgages may be able to refinance to a fixed mortgage. This also helps stabilize the real-estate industry.

Appraisals may be waived, in some cases.

Challenges of Harp 2.0

Of the two parts of Harp 2.0, the Fannie Mae Program is easier to qualify for. The debt-to-income ratio may even go as high as 65 percent. Closing costs can be financed.

The Freddie Mac Program typically allows a debt-to-income ratio of only 45 percent.

There is a limitation on closing costs financed, so borrowers must typically bring in one mortgage payment or more to closing. However, they will skip the next month’s mortgage payment.

Rates are higher than standard conventional rates but are still running in the low to high 4 percent range.

Process to apply

Those who wish to apply for Harp 2.0 refinancing should contact a loan officer.

The program deadline is Dec. 31.

To determine whether your loan is owned by Fannie Mae or Freddie Mac, the links are as follows. A loan officer can easily look this up for you.

• www.fanniemae.com/loanlookup/

• https://ww3.freddiemac.com/corporate/

Your loan officer will pull credit reports and obtain additional information to provide you with a quote. Then, expect to submit full refinance documentation of income and assets.

This program can be good for consumers and the market. It can be a good alternative for borrowers who have worked to stay current on their mortgage and should have the opportunity to refinance.

• Carla Carroll is a senior loan officer at Diversified Capital Funding in Tracy. Contact her at 914-3753 or ccarroll@divcap.net.