Will Congress Pass HARP 3.0

Many homeowners are wondering; Will Congress Pass HARP 3.0 ? Ever since the HARP program was introduced 2.5 yrs ago underwater homeowners have been clamoring to find a way to refinance their mortgage for a better rate despite having negative equity in their home. Many lenders have boasted an ability to get these loans completed, however most have been unable to perform. Out of the millions of homeowners who need help. Only a few hundred thousand have had any success refinancing with the HARP program. This is mostly due to the “rep and warrants” that are forced on lenders to accept. This mean that should the borrower default on this loan for any reason, than the lender is forced by the investor to buy back that loan. Most lenders just do not like the risk when lending money on a home without equity. HARP 3.0 has been discussed and kicked around congress for many months. Will Congress Pass HARP 3.0 after all the debate and allow home owners whose loan is not guaranteed by Fannie Mae or Freddie Mac refinance?

As of July, 22.4 percent of homeowners with a mortgage owed more than their home was worth, according to a new report from Lender Processing Services. (Read More:

The numbers go higher, as the loans get more troubled. Of non-current mortgages, 57.6 percent are underwater, and of loans in foreclosure, 68.3 percent.

Being underwater on your mortgage does not necessarily mean that you can’t afford to pay that mortgage. In fact, 18 percent of loans that are current are underwater, according to LPS, with the depths ranging from just 0.4 percent in Wyoming to a whopping 55 percent of Nevada homeowners owing more than their home is worth. Unfortunately, negative equity does breed delinquency.

“As negative equity increases, we see corresponding increases in the number of new problem loans,” said Herb Blecher of LPS Applied Analytics. “In Nevada and Florida, two of the states with the highest percentage of underwater borrowers, more than three percent of borrowers who were up to date on their payments are 60 or more days delinquent six months later. This suggests that further home price declines — should they occur — could jeopardize recent improvements.”

The Obama administration has focused its latest housing efforts on refinancing, pushing expansions to its existing Home Affordable Refinance Program (HARP), which allows borrowers with loans backed by Fannie Mae and Freddie Mac to refinance to lower rates even if they are deep underwater.

More than 519,000 loans have been refinance under HARP since the beginning of this year, more than all of the HARP refinances done in 2011. The key was a change this year that took away any limits as to how far underwater the borrower could be.

The expansions are in a bill sponsored by Senate Democrats Barbara Boxer, D-Calif., and Robert Menendez, D-N.J., which has seen little action of late but was “reintroduced” Monday. The original bill would protect banks against so-called “put-backs” on the refinances. That’s when Fannie and Freddie require the lender to buy back a defaulted loan. Currently lenders are only protected on these refis when they are already the ones servicing the loans, so this would make it so that borrowers don’t necessarily have to refinance with their existing lender.

The new lender would be protected from put-backs as well. Borrowers complain that when they refinance with their current lender, they are not getting the best rate because some banks have too much demand. The bill would also remove appraisal  and up-front fees for borrowers.

“This bill is a win-win-win: homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will be strengthened. That’s why the Menendez-Boxer bill has such broad support from industry and consumer groups,” said Senator Boxer in a release.

The mortgage industry has secured changes to the bill, including keeping the current June 1, 2009 cut-off date for HARP refinances. The bill had had a provision that put the cut-off date at June, 2010. Other compromises drop penalties against mortgage insurers and second lien holders. There had been discussion of a more complicated compromise designed to get Republicans on board.

“We believe there is talk of including a Qualified Mortgage safe harbor in the Boxer-Menendez HARP expansion bill in order to pick up enough GOP support to get the measure enacted,” wrote Jaret Seiberg of Guggenheim Partners. “The safe harbor could require the Consumer Financial Protection Bureau (CFPB) to define mortgages that based on their underwriting terms are deemed to meet the ability to repay requirement in Dodd-Frank.
That there is talk of a QM safe harbor shows how much some Democrats want to get this enacted.”

 

Safe harbor means that a lender would automatically be safe from litigation if they underwrote the loan according to the CFPB’s underwriting terms. This as opposed to having to take the case to court and defend why the loan should not be bought back by the lender. Sen. Menendez said that was in fact not in this current version, which he adds would be endorsed by the White House.

“We have engaged with the White House in its official role because we know this is on one of the president’s to-do lists,” said Menendez on a conference call with reporters.

Industry leaders, however, are already responding to the possibility of more additions to the bill.

“With the revisions that were made and introduced today, we are glad to be able to support the bill to help additional segment of homeowners who had not previously been able to refinance at today’s historically low rates,” said David Stevens, president and CEO of the Mortgage Bankers Association.  “As it pertains to amendments, we will evaluate each one on its own merits.  We have certainly supported a safe harbor for the QM rule, and would continue to support that concept, but we also want to be careful about loading up the bill with amendments that could end up hurting its chances for passage.”

 

Two U.S. Senators have reintroduced a bill which aimed at giving Freddie Mac and Fannie Mae (the GSEs) financedhomeowners with equity the some opportunity to refinance as currently enjoyed by homeowners who are underwater.  The Responsible Homeowner Refinancing Act would extend the guidelines and reduced fees available under the Home Affordable Refinance Program (HARP) to homeowners regardless of the loan-to-value (LTV) ratio of their current GSE owned or guaranteed loan.

According to the THOMAS Library of Congress website, the bill was originally introduced on May 10, 2012 and referred to the Senate Banking Committee where it apparently died.  The new version is sponsored by Robert Menendez (D-NJ) and Barbara Boxer (D-CA).

According to its sponsors, the bill would be available to borrowers who are current on their existing GSE owned or guaranteed loans.  It would:

  • Remove barriers to competition.
    The lender currently servicing a loan has an advantage over a new lender which faces stricter underwriting criteria and greater risks from the GSEs’ reps and warranties should the borrower default.  These different standards have hindered competition, resulting in higher prices and less favorable terms for borrowers.  The proposed legislation would direct the GSEs to require equalize the underwriting and associated reps and warranties between new lenders and current servicers.
  • Guarantee equal access to streamlined refinancing for all GSE borrowers.
    The revised HARP guidelines continued to distinguish between borrowers with LTVs above 80 percent and those below, leaving higher equity borrowers with greater costs and administrative burdens and effectively locking them out of the program.  The bill will allow all lenders to offer a single, streamlined program to all GSE borrowers who have been paying their loans on time.
  • Eliminate up-front fees completely on refinances.
    Under enhancements to HARP earlier this year, some fees for HARP loans were lowered and others were eliminated completely, creating what the sponsors call an economically indefensible situation in which borrowers with significant equity face steeper costs for refinancing than borrowers with no equity and hence presenting considerably greater risk.  These additional fees can be as high as two percent of the loan amount.  The bill prohibits the GSEs from charging up-front fees to refinance any loan they already guarantee, which is also in the best financial interests of the GSE’s and taxpayers.
  • Eliminate appraisal costs for all borrowers.
    Borrowers who live in communities without a significant number of recent home sales are often precluded from the Automated Valuation Models widely used by the GSEs and must pay hundreds of dollars for a manual appraisal to refinance.  The proposed bill will require the GSEs to develop additional streamlined alternatives to manual appraisals, eliminating a significant barrier and reducing cost and time for borrowers and lenders alike, especially in rural areas
  • Further streamline the refinancing application process.
    Since participation in HARP requires that borrowers be current on their loans and with a demonstrated commitment to timely payments, there is no reason to require proof of employment or income for these loans.  The GSEs already own the risk which will only decrease with lower interest rates and payments.  The bill eliminates employment and income verification requirements, further streamlining the refinancing process and removing unnecessary costs and hassle for lenders and borrowers alike.
  • Save taxpayers money.
    The sponsors cite the Congressional Budget Office which says the bill will pay for itself through reduced default rates of existing GSE loans.

Menendez said, “Passing this bill will get rid of the red tape that leaves millions of borrowers trapped in higher interest loans, puts money back into the pockets of middle class families, and strengthens our economy. I’m asking Republicans to join us in putting families first.”

Boxer said, “This bill is a win-win-win: homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will be strengthened. That’s why the Menendez-Boxer bill has such broad support from industry and consumer groups.”

The legislation has received support from the Mortgage Bankers Association, National Association of Realtors, National Association of Home Builders and the Center for Responsible Lending.

It’s not just about the rate anymore. Negative equity, strict underwriting and big bank backlogs are keeping many borrowers from taking advantage of these incredibly low mortgage rates.

“If history is any lesson, the only thing that can really extend refi activity in a low rate environment is a loosening of underwriting standards to bring more borrowers into the market. And that is not likely to happen anytime soon,” said Guy Cecala of Inside Mortgage Finance.

Twice this year the market did see a surge in refinancing, all due to changes in government programs.

At the beginning of the year, Fannie Mae and Freddie Mac (still under government conservatorship), expanded the Home Affordable Refinance Program for borrowers who owe more on their mortgages than their homes are worth. The limit used to be 25 percent negative equity, but in January, that limit was lifted entirely.

Then in June, the FHA changed the rules on its streamline refi program for borrowers who already have FHA loans, dropping underwriting almost entirely. While both changes sparked temporary surges, they were not enough to serve the entire market.

“We are definitely running out of borrowers to refi even with mortgages rates at record lows. Most of the activity we have seen in recent months are the same borrowers who refinanced a year or so ago, refinancing again. While programs like HARP and FHA’s Streamlined Refi can provide a temporary surge in refis, they still only account for a relatively small share of borrowers,” Cecala noted.

Government-backed mortgages (Fannie Mae, Freddie Mac, Ginnie Mae) accounted for 58 percent of the $10.179 trillion U.S. mortgage market as of the end of March, 2012, according to data compiled by Inside Mortgage Finance.

Private-label mortgage-backed securities (MBS) investors held 10 percent and banks/other financial institutions held 32 percent.  It’s that non-government, 42 percent of the market that is having the most trouble refinancing due to poor credit scores and negative equity. Lenders and investors are particularly risk-averse these days.

Thursday the Obama Administration will renew its push for a major refinancing program that would involve all loans, but it would need congressional approval. There are several proposals under consideration.

The “Responsible Homeowners Refinancing Act,” sponsored by Senators Barbara Boxer, D-Calif., and Robert Menendez, D-NJ, would expand the HARP program, extending streamlined refinancing for Fannie and Freddie borrowers and eliminating up-front fees and appraisal costs. Jaret Seiberg at Guggenheim Partners puts the odds of that passing at around 60 percent.

Seiberg is less optimistic about another bill that would allow non-agency mortgages refinance into FHA loans, regardless of negative equity. The bill would raise GSE (Fannie and Freddie) guarantee fees to offset its costs.

“MBS investors are likely in for a bumpy ride. As we believe Congress will not enact the legislation, there should not be any changes to prepayment rates. Yet the market is likely to react to every headline, which suggests significant volatility,” Seiberg wrote.

 

HARP : Minimal Qualification Standards

The Home Affordable Refinance Program (HARP) is a government refinance program meant for homeowners whose homes have lost value. It was initially launched in 2009 as part of the Making Home Affordable initiative, a program which also launched HAMP (Home Affordable Modification Program).

The main difference between HARP and HAMP is that HARP is for homeowners who are current on their respective mortgages. HAMP is for homeowners facing foreclosure or whom are otherwise delinquent on their mortgage.

HARP is sometimes called the “Obama Refi”, and it’s a program offered via Fannie Mae and Freddie Mac exclusively. The Fannie Mae version of HARP is known as “Refi Plus”. The Freddie Mac version is known as “Relief Refinance”. Both programs do the exact same thing.

The requirements for a HARP mortgage are basic :

  1. Your loan must have been securitized by Fannie Mae or Freddie Mac
  2. Your loan must have been securitized on, or before, May 31, 2009
  3. You may not have previously used the HARP program to refinance

In addition, your mortgage payment history must be perfect for the last 6 months with no more than one late payment in the last 12 months.

 

HARP 2.0 : Underwater Homeowners Get Relief

When HARP was initially launched in 2009, it was built to reach more than 7 million U.S. households. Through its first two years, however, it was clear that the Home Affordable Refinance Program was falling short of that goal.

Between 2009-2011, HARP helped fewer than one million households.

So, to help give HARP more teeth, the government re-wrote and re-tooled it. The changes were split into two parts. The first part was meant to reduce HARP lending risks for banks, compelling more banks to offer the program. That move was successful.

The second part was geared at homeowners. With HARP 2.0, regardless of home equity, homeowners were made refinance-eligible. HARP was changed to allow for unlimited LTV. So long as your loan size does not exceed your local conforming loan limits, you can use HARP.

It doesn’t matter what your home is (not) worth. Yes, you can use HARP to refinance.

 

Since HARP has moved to unlimited LTV, it’s become a big part of the refinance landscape in the states hardest-hit by last decade’s housing downturn. States like Nevada, for example, where nearly 70% of all refinances in July were HARP refinances. Or, Florida, in which 60% of all refinances were HARP.

There were four states in which HARP accounted for more than half of all conforming refis.

For July 2012, the top 10 states in terms of HARP refinances as a percentage of all conforming refinances closed were :

  1. Nevada : 69.49% of closed conforming refinances were via HARP
  2. Florida : 60.04% of closed conforming refinances were via HARP
  3. Arizona : 57.13% of closed conforming refinances were via HARP
  4. Michigan : 51.78% of closed conforming refinances were via HARP
  5. Georgia ; 49.67% of closed conforming refinances were via HARP
  6. Idaho : 49.42% of closed conforming refinances were via HARP
  7. Minnesota : 37.05% of closed conforming refinances were via HARP
  8. Oregon : 35.20% of closed conforming refinances were via HARP
  9. Washington : 32.05% of closed conforming refinances were via HARP
  10. Maryland : 30.25% of closed conforming refinances were via HARP

The states in which HARP loan were less common included Alaska (5.77%), South Dakota (4.12%) and North Dakota (1.05%).

These states are home to fewer Home Affordable Refinance Program refinances, in part, because the pool of eligible borrowers is relatively smaller. Alaska, North Dakota and South Dakota didn’t see the same home price deterioration as much of the country between 2007 and October 2011.

 

If you’ve been looking at the HARP program — regardless of your loan-to-value and regardless of whether you’ve been turned down for HARP by a bank — it’s a good time to look again. HARP mortgage guidelines vary by bank, and those guidelines seem to be getting more loose, on the whole.

 

What Is HARP?

HARP was started in April 2009. It goes by several names. The government calls it HARP, as in Home Affordable Refinance Program.

The program is also known as the Making Home Affordable plan, the Obama Refi plan, DU Refi+, and Relief Refinance.

In order to be eligible for the HARP refinance program :

  1. Your loan must be backed by Fannie Mae or Freddie Mac.
  2. Your current mortgage must have a securitization date prior to June 1, 2009

If you meet these two criteria, you may be HARP-eligible. If your mortgage is an FHA, USDA or a jumbo mortgage, you are not HARP-eligible.

 

Yes, everything you are reading is accurate as of today, . This post includes the latest changes as rolled out by the Federal Home Finance Agency on October 24, 2011, and as confirmed by Fannie Mae and Freddie Mac on November 15, 2011. HARP 2.0 was formally released by Fannie Mae and Freddie Mac March 17, 2012.

Is “HARP” the same thing as the government’s “Making Home Affordable” program?

Yes, the names HARP and Making Home Affordable are interchangeable.

How do I know if Fannie Mae or Freddie Mac has my mortgage?

Fannie Mae and Freddie Mac have “lookup” forms on their respective websites. Check Fannie Mae’s first because Fannie Mae’s market share is larger. If no match is found, then check Freddie Mac. Your loan must appear on one of these two sites to be eligible for HARP.

If my mortgage is held by Fannie Mae or Freddie Mac, am I instantly-eligible for the Home Affordable Refinance Program?

No. There is a series of criteria. Having your mortgage held by Fannie or Freddie is just a pre-qualifier.

My mortgage is held by Fannie/Freddie. Now what do I do?

Find a recent mortgage statement and write “Fannie Mae” or “Freddie Mac” on it — whichever group backs your home loan — so you don’t forget. Give that information to your lender when you apply for your HARP refinance.

My mortgage is backed by Wells Fargo. Am I eligible for HARP?

It’s possible that your mortgage is backed by Wells Fargo, but the more likely answer is that Wells Fargo is just your mortgage servicer; the bank that collects your payments. Wells Fargo backs very few of its own loans. Most loans for which payments are sent to Wells Fargo are backed by either Fannie Mae or Freddie Mac. Double-check with Fannie Mae and Freddie Mac before assuming Wells Fargo backs your loan.

My mortgage is backed by Bank of America. Am I eligible for HARP?

Bank of America does back some of its own loans, but the more likely answer is that Bank of America is your mortgage servicer; the bank that collects your monthly mortgage payments. Bank of America backs very few of its own loans. For most loans for which payments are sent to Bank of America, Fannie Mae or Freddie Mac are the actual loan-backers. Double-check with Fannie Mae and Freddie Mac to make sure Bank of America doesn’t hold your loan.

My mortgage is backed by Chase. Am I eligible for HARP?

There is a chance that Chase backs your loan, but what’s more likely is that Chase is just your mortgage servicer; the bank that collects your payments each month. Chase backs very few of its own loans. For most loans for which payments are sent to Chase, you’ll find that Fannie Mae or Freddie Mac are the actual loan-backers. Double-check with Fannie Mae’s and Freddie Mac’s websites to make sure your loan is not held by Chase.

My mortgage is backed by CitiMortgage. Am I eligible for HARP?

Your mortgage statement may have the CitiMortgage logo on it, but that doesn’t necessarily mean that CitiMortgage back your loans. It’s more likely that CitiMortgage is your mortgage servicer; the bank paid to process your payment each month. With most loans for which payments are sent to CitiMortgage, the actual loan-backer is Fannie Mae or Freddie Mac. Double-check with Fannie Mae’s and Freddie Mac’s websites to see if you can find your loan.

My lender won’t do HARP. Can I use HARP with another lender?

Yes. You can do HARP with any participating lender. This is a major change from the original HARP program. The government is trying to get as many people access to the program as possible.

My mortgage is serviced by Cenlar. Cenlar doesn’t do mortgages. Am I eligible for HARP?

Cenlar is a mortgage servicer. It does not offer new mortgages — even for HARP. However, that has no bearing on your ability to get a HARP refinance. You can work with any participating lender in the country so reach out to your favorite bank and get started from there.

My mortgage is serviced by Seterus. Seterus doesn’t do mortgages. Am I eligible for HARP?

Seterus is a mortgage servicer. It does not offer new mortgages — even for HARP. However, that has no bearing on your ability to get a HARP refinance. You can work with any participating lender in the country so reach out to your favorite bank and get started from there.

What if neither Fannie Mae nor Freddie Mac has a record of my mortgage?

If neither Fannie nor Freddie has record of your mortgage, your loan is not HARP-eligible.

I have a jumbo mortgage. Can I use HARP 2.0?

No, HARP 2.0 is not meant for jumbo mortgages. It’s for mortgages backed by Fannie Mae or Freddie Mac only. There is talk of a HARP 3 program. HARP 3 would likely include loan types not covered by today’s program guidelines.

I have an Alt-A mortgage. Can I use HARP 2.0?

No, HARP 2.0 is not meant for Alt-A mortgages. It’s for mortgages backed by Fannie Mae or Freddie Mac only. There is talk of a HARP 3 program. HARP 3 would likely include loan types not covered by today’s program guidelines.

I have an interest only mortgage. Can I use HARP 2.0?

If your current mortgage is interest only, you may be able to use HARP. If your interest only mortgage is a conforming loan backed by Fannie Mae or Freddie Mac, you should be HARP-eligible. Otherwise, your loan may be an Alt-A or sub-prime mortgage in which case you will not be HARP 2-eligible. There is talk of a HARP 3 program. HARP 3 would likely include loan types not covered by today’s program guidelines.

I have a balloon mortgage. Can I use HARP 2.0?

If your current mortgage is a balloon mortgage, you may be able to use HARP. It depends on whether your loan is conforming, and whether it’s backed by Fannie Mae or Freddie Mac. If you are not HARP 2-eligible, there is talk of a HARP 3 program and that may help you. HARP 3 would likely include loan types not covered by today’s program guidelines.

What is HARP 3?

HARP 3 is the next iteration of HARP. It’s currently in talks in Congress. There is no expectation for when, or if, it will be passed. HARP 3 is rumored to include all of the loan types and borrowers who are specifically excluded from HARP 2.

Does HARP work the same with Fannie Mae as with Freddie Mac?

Yes, for the most part, the program is the same with Fannie Mae as with Freddie Mac. There are some small differences, but they affect just a tiny, tiny portion of the general population. For everyone else, the guidelines work the same.

My bank sent me a HARP rate quote. It looks like a high interest rate. Should I shop it around?

Yes, you should always shop HARP mortgage rates because they vary so widely from bank-to-bank. You may save a lot of money just by getting a second opinion.

Am I eligible for the Home Affordable Refinance Program if I’m behind on my mortgage?

No. You must be current on your mortgage to refinance via HARP.

My lender denied my HARP mortgage because my LTV is too high. What do I do?

Different banks are using different variations of the program. The edits are subtle, but they’re enough to cause some people to get denied who should otherwise have been approved. If you’ve been turned down for HARP 2.0, just try with a different bank.

My lender denied my HARP mortgage because credit scores are too low. What do I do?

Different banks are using different variations of the program. The edits are subtle, but they’re enough to cause some people to get denied who should otherwise have been approved. If you’ve been turned down for HARP 2.0, just try with a different bank.

What is the mortgage rate for a HARP refinance?

Mortgage rates for the HARP mortgage program are the same as for a “traditional” refinance. There is no “premium” for using the HARP program. Make sure you shop around, therefore — just like you would with a non-HARP refinance.

Will the Home Affordable Refinance Program help me avoid foreclosure?

No. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It’s meant to give homeowners who are current on their mortgages, and who have lost home equity, a chance to refinance at today’s low mortgage rates.

What are the minimum requirements to be HARP-eligible?

First, your home loan must be paid on-time for the prior 6 months, and at least 11 of the most recent 12 months. Second, your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009. And, third, you may not have used the program before — only one HARP refinance per mortgage is allowed.

My home is not underwater. Can I still use HARP 2.0?

Yes, you can use HARP even if you’re not “underwater”.

Will HARP 2.0 “forgive” my mortgage balance?

No, HARP does not forgive your mortgage balance, nor does it reduce your principal owed. HARP refinances your current loan balance only. It is the same as any other refinance.

My mortgage was securitized shortly after the HARP deadline of May 31, 2009. Can I get a waiver or exception?

No, there are no “date exceptions” for HARP. If your loan was not securitized on, or before, May 31, 2009, you cannot use the program.

My mortgage closed in May 2009 but wasn’t securitized until after the June 1, 2009 cutoff date. Can I get a waiver or exception for HARP 2?

No, there are no “date exceptions” for HARP. If your loan was not securitized on, or before, May 31, 2009, you cannot use the program.

Why was the date May 31, 2009 chosen as the HARP deadline?

There’s no official answer for this one but, in March 2012, a Fannie Mae representative said that May 31, 2009 was selected as the HARP cut-off date because that those who financed a home with a mortgage prior to May 31, 2009 may not have been aware of the rapidly changing mortgage market.

If I refinanced with HARP a few years ago, can I use it again for HARP II?

No. You can only use the HARP mortgage program one time per home. If you used HARP 1, you cannot use HARP 2.0.

I refinanced into a HARP loan a few years ago, but my bank never told me it was a HARP loan. I feel like I was lied to. Can I use the program again under the HARP II?

No. You can only use the HARP mortgage program one time per home. If you used HARP 1, you cannot use HARP 2.0. The government makes no exceptions on this policy.

Is there a loan-to-value restriction for HARP?

No. All homes — regardless of how far underwater they are — are eligible for the HARP program.

Yes, you can use HARP even if you’re really far underwater on your mortgage. There is no loan-to-value restriction under the HARP mortgage program so long as your new mortgage is a fixed rate loan with a term of 30 years or fewer. If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105%.

Maybe I wasn’t clear. I am really, really far underwater on my mortgage. Are you sure I can use HARP?

Yes, I am sure. The new HARP mortgage program specifically has no loan-to-value restriction so that homeowners in Florida, California, Arizona and Nevada can take advantage of it. You can have 300% loan-to-value, and still be HARP-eligible. HARP is now unlimited LTV for fixed rate loans with 30-year terms or less.

You keep saying LTV doesn’t matter, but my bank turned me down for HARP because my loan-to-value was too high.

That’s normal, actually. Not every bank will underwrite HARP loans to the letter of the guidelines. Loans with high LTVs can be risky to a bank. Therefore, some banks will limit their business to loans under 125% loan-to-value, for example. Remember — just because one bank turned you down doesn’t mean that every bank will. Apply somewhere else to get a second option.

My home is gaining value as the housing market improves. Will this hurt my ability to use HARP to refinance my home?

In general, no. As your home increases in value, its loan to-value decreases. So long as your loan-to-value remains above 80 percent, you should remain HARP-eligible. In the event your home’s loan-to-value falls below 80%, you may have difficulty finding lenders to refinance your home. As always, remember to shop around. If the first bank you ask says no, it doesn’t mean that all banks will say no, too.

If I refinance with HARP using an ARM, do I still get “unlimited LTV”?

No, if you use an ARM for HARP 2.0, you are limited to 105% loan-to-value. Only fixed rate loans get the unlimited LTV treatment.

Why does my bank say I’m limited to 105% LTV with my HARP refinance? I want a fixed-rate loan.

Not all banks are honoring the HARP 2.0 mortgage guidelines as they are written and one common “edit” is to change the maximum allowable LTV. You may want to get a HARP rate quote from another bank — one that won’t restrict your loan size.

Why does my bank say I’m limited to 125% LTV with my HARP refinance? I want a fixed-rate loan.

Not all banks are honoring the HARP 2.0 mortgage guidelines as they are written and one common “edit” is to change the maximum allowable LTV. You may want to get a HARP rate quote from another bank — one that won’t restrict your loan size.

Will my home require an appraisal with the HARP mortgage program?

Sort of. Although your home’s value doesn’t matter for the HARP mortgage program, lenders will run what’s called an “automated valuation model” (AVM) on your home. If the value meets reliability standards, no physical appraisal will be required. However, your lender may choose to commission a physical appraisal anyway — just to make sure your home is “standing”.

Is HARP the same thing as an FHA Streamline Refinance?

No, the HARP mortgage program is administered through Fannie Mae and Freddie Mac. FHA Streamline Refinances are performed through the FHA. The programs have similarities, however.

I have an FHA mortgage. Can I use the HARP 2.0 program?

No, you cannot use the HARP 2.0 program for an FHA loan. If your current mortgage is backed by the FHA, and your home is underwater, use the FHA Streamline Refinance program.

I have a USDA mortgage. Can I use the HARP 2.0 program?

No, you cannot use the HARP 2.0 program for a USDA loan. If your current mortgage is backed by the USDA, and your home is underwater, use the USDA’s Refinance program.

Does Ginnie Mae participate in the HARP Refinance program?

No, Ginnie Mae does not participate in the HARP Refinance program. Ginnie Mae is associated with FHA mortgages — not conventional ones. HARP 2 is for conventional mortgages only.

Do I have to HARP refinance with my current mortgage lender?

No, you can do a HARP refinance with any participating mortgage lender.

So, I can use any mortgage lender for my HARP Refinance?

Yes. With the Home Affordable Refinance Program, you can refinance with any participating HARP lender.

My current bank says that they’re the only ones who can do my HARP Refinance. Is that true?

No, that’s not true. Or, at least it shouldn’t be. There are very few instances in which a HARP applicant will be precluded from shopping for the best rate. It’s doubtful that your situation is one of them.

My current mortgage is with [YOUR BANK HERE] and I don’t like them. Can I work with another bank?

Yes, with HARP, you can work with any participating lender in the country.

My bank says I can’t get a HARP loan unless I work with them. Is that true?

Except in rare cases, no. With HARP, you can work with any participating lender in the country. And there are a lot of them.

Can I refinance my HARP mortgage into a shorter term? I want a 15-year fixed rate mortgage — not a 30-year.

Yes, you can shorten your loan term via HARP. You must still qualify for the mortgage based on payments, though. If the “payment shock” of switching to a 15-year fixed rate mortgage is deemed to steep, your lender may not approve the loan. Be sure to ask.

I put down 20% when I bought my home. My home is now underwater. If I refinance with HARP, will I have to pay mortgage insurance now?

No, you won’t need to pay mortgage insurance. If your current loan doesn’t require PMI, your new loan won’t require it, either.

I pay PMI now. Will my PMI payments go up with a new HARP refinance?

No, your private mortgage insurance payments will not increase. However, the “transfer” of your mortgage insurance policy may require an extra step. Remind your lender that you’re paying PMI to help the refinance process move more smoothly.

My bank says I can’t refinance with HARP 2.0 because I have PMI. Is that true?

No, it’s not true. You can refinance via HARP 2.0 even if your current mortgage has private mortgage insurance.

Why does my loan officer tell me I can’t refinance with HARP because my current mortgage has PMI?

The new HARP program is exactly that — new. There are new rules and guidelines and not every bank is up-to-speed on what’s going on. If you’re hearing that you can’t refinance your current mortgage because it has PMI on it, that’s a signal that you’re working with sub-optimal loan officer. You may want to shop around.

My current mortgage has Lender-Paid Mortgage Insurance (LPMI). Can I refinance via HARP?

Yes, you can refinance your mortgage via HARP 2.0 if your current loan has lender-paid mortgage insurance (LPMI). It’s your loan officer’s responsibility to make sure that your new mortgage carries, at minimum, the same amount of coverage.

You’re saying I can refinance with LPMI but my bank says I can’t. Who is right?

With respect to LPMI, different banks have different rules for HARP. There are banks closing HARP loans with lender-paid mortgage insurance attached. That’s a fact. If your bank won’t do loans with LPMI, find one that will.

How do I choose my PMI “coverage” when I refinance a HARP loan that has LPMI?

Your loan officer will know what to do. Just make sure you disclose that your mortgage has LPMI at the time of application so your loan officer knows what to do. Otherwise, your loan could be delayed in processing.

How do I know if my mortgage has Lender-Paid Mortgage Insurance (LPMI)?

To find out if your mortgage has lender-paid mortgage insurance (LPMI), locate your loan paperwork from closing. There should be a clear disclosure that states that your mortgage features LPMI, and the terms should be clearly labeled for you.

I don’t see an LPMI disclosure in my closing package but I think that I have it. How do I know if my mortgage has LPMI?

If there is no LPMI disclosure, first check if your first mortgage’s loan-to-value exceeded 80% at the time of closing. If it did, look to see if you are paying monthly mortgage insurance. If you are not paying monthly PMI, you’re likely carrying LPMI.

I was turned down for HARP because the bank says I have mortgage insurance. I think they’re wrong.

There are different types of private mortgage insurance and not all kinds are paid monthly. One such example is lender-paid mortgage insurance for which your lender pays PMI on your behalf each month. You don’t see the payments made, but you still have PMI. There are banks that will HARP-refinance loans with LPMI. If you bank says no, ask another bank and you may get a different answer.

What’s the bottom line with HARP refinances and mortgage insurance?

With HARP, regardless of whether you have borrower-paid mortgage insurance (BPMI) or lender-paid mortgage insurance (LPMI), a refinance is possible. The key is that the new loan has mortgage insurance coverage at least equal to the mortgage insurance coverage on your current mortgage.

What if my lender won’t give me a HARP refinance because I have mortgage insurance?

If your lender tells you that you can’t have a HARP 2.0 loan because you have mortgage insurance, find a new lender. There are plenty that of banks that can — and want to — help you.

What’s the biggest mortgage I can get with a HARP refinance?

HARP refinances are limited to your area’s conforming loan limits. In most cities, the conforming loan limit is $417,000. However, there are some cities in which conforming loan limits are as high at $625,500.  You can lookup your area’s conforming loan limits

Can I do a cash-out refinances with HARP?

No, the HARP mortgage program doesn’t allow cash out refinance. Only rate-and-term refinances are allowable.

Can I refinance a second/vacation home with HARP?

Yes, you can refinance an second/vacation property with HARP, even if the home was once your primary residence. The loan must meet typical program eligibility standards.

Can I refinance an investment/rental property with HARP?

Yes, you can refinance an investment/rental property with HARP, even if the home was once your primary residence. You can refinance a home on which you’re an “accidental landlord”. The loan must meet typical program eligibility standards.

I rent out my old home. Is it HARP-eligible even though it’s an investment property now?

Yes, you can use the HARP Refinance program for your former residence — even if there’s a renter there now.

How long do I have to stay in my house if I use HARP on my primary residence?

There is no specific timeframe for which you’re required to stay in your home if you use HARP 2.0. Just like any other mortgage, if you plan to stay in your home post-closing, it’s your primary residence. If you plan to turn it into a rental, it’s an investment property.

These things I’m reading here… Why, when I call my bank, do they tell me it’s not true?

It’s possible that the call center representative to whom you’re speaking is neither knowledgeable about HARP, nor the actual mortgage underwriting process. This post is researched and cross-referenced against Fannie Mae and Freddie Mac guidelines, and publicly-available reports from the FHFA.

Are condominiums eligible for HARP refinancing?

Yes, condominiums can be financed on the HARP refinance program. Warrantability standards still apply.

My bank says that condos can’t be refinanced via HARP?

That’s not true. Condominiums can be financed on the HARP refinance program. If your current lender is unable or unwilling to help, remember that you can take your HARP loan to any participating bank in the country. Other banks may know what to do with condos.

Can I consolidate mortgages with a HARP refinance?

No, you cannot consolidate multiple mortgages with the HARP refinance program. It’s for first liens only. All subordinate/junior liens must be resubordinated to the new first mortgage.

Is there a HARP program for second mortgages? My second mortgage is at a high rate and I want to refinance it.

No, the Home Affordable Refinance Program is for first mortgages only. Second mortgages cannot be refinanced via HARP, nor can they be consolidated into a first mortgage.

What happens to my second mortgage when I refinance my first mortgage using HARP 2.0?

HARP 2.0 is meant for first liens only. Second liens are meant to subordinate. You’ll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.

My second mortgage company won’t let me refinance my first mortgage via HARP. Can they do that?

With the HARP refinance program, second liens are meant to subordinate. Second lien holders know this, however, not all second lien holders will agree to it. This is against the spirit of the program, but second lien holders are within their rights to deny the refinance.

My second mortgage isn’t backed by Fannie Mae or Freddie Mac. Is that a problem?

No, it doesn’t matter if your second mortgage isn’t backed by Fannie Mae or Freddie Mac. Second mortgages are ignored as part of HARP. They can’t be refinanced, and they can’t be consolidated. Second mortgages are a non-factor in HARP 2.0.

I have an 80/10/10 mortgage. Can I use HARP 2.0?

Yes, if you have an 80/10/10 mortgage, you can use HARP so long as you meet the program’s basic eligibility requirements. You cannot combine your two mortgages, however. Nor can you take cash out.

I have an 80/20 mortgage. Can I use HARP 2.0?

Yes, if you have an 80/20 mortgage, you can use HARP so long as you meet the program’s basic eligibility requirements. You cannot combine your two mortgages, however. Nor can you take cash out.

My bank is not setup for HARP and I want to refinance. What do I do?

If your current bank is not setup for HARP, find a new lender. HARP is available through any participating bank (and there are a lot of them).

Yes, mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash.  In no cases may loan sizes exceed the local conforming loan limits, however. In most U.S. markets, this limit is $417,000. In certain high-cost areas, including Orange County, California and Fairfax, Virginia, for example, the limit ranges as high as $625,500.

I am unemployed and without income. Am I HARP-eligible?

Yes, you do not need to be employed to use the HARP mortgage program. Applicants do not need to be “requalified” unless their new principal + interest payment increases by more than 20%. If the new payment increases by less than 20%, or falls, there is no requalification necessary.

What is the maximum income that a HARP applicant is allowed?

The HARP refinance program has no maximum income limits. You cannot “earn too much” to qualify.

So, I can’t earn too much money to use HARP 2.0?

No, there are no income restrictions for the Home Affordable Refinance Program (HARP). A similar-sounding program, though — Home Affordable Modification Program (HAMP) does have income limitations. Many people confuse the two.

Is HARP the same thing as HAMP?

No. HARP stands for Home Affordable Refinance Program. HAMP stands for Home Affordable Modification Program. Both programs are supported by the Making Home Affordable initiative, but that’s about where the similarities end.

I used HAMP with my current lender. Can I use HARP now?

If you’ve used the HAMP program with your current lender to modify your mortgage, you may not be HARP-eligible. It depends on the terms of your modification. Ask your current servicer if you’re HARP-eligible. Or, if you’d like, you can

I am now divorced. I want to remove my ex-spouse from the mortgage. Can I do that with HARP?

Yes. With HARP, a borrower on the mortgage can be removed via a refinance so long as that person is also removed from the deed; and has no ownership interest in the home.

Do HARP refinances use Loan-Level Pricing Adjustments (LLPAs)?

Yes, HARP mortgages use loan-level pricing adjustments, but LLPAs are dramatically reduced on a HARP refinance and, in some cases, waived entirely. For example, there are no LLPAs for fixed-rare HARP refinances with terms of 20 years or fewer. For all other loans, loan-level pricing adjustments are capped at 0.75 points.

Does a HARP Refinances require LLPAs for a 15-year fixed rate mortgage?

No, there are no LLPAs for 15-year fixed rate mortgage via the HARP Refinance program.

Is there a minimum credit score to use the HARP program?

No, there is no minimum credit score requirement with the HARP mortgage program, per se. However, you must qualify for the mortgage based on traditional underwriting standards.

Do I have to refinance my mortgage with my current lender?

No, you can do a HARP refinance with any participating lender you want.

My current lender tells me that if I want to do a HARP refinance, I have to go through him. Is that true?

No, it’s not true. You are allowed to do a HARP refinance with any HARP-participating lender.

My bank called me for a HARP refinance. The rate seems high. Should I shop around?

Yes, it’s always a good idea to shop for the best combination of mortgage rates and loan fees. However, be sure to shop with reputable lenders that have experience underwriting and approving HARP mortgages. HARP 2.0 is a new refinance program and not many banks have expertise with them. You don’t want to have your loan approval fall apart because your lender failed to underwrite to HARP mortgage standards.

Where can I get the lowest rates on HARP loans?

The HARP program is just like any other mortgage — you’ll want to shop around for the best rates and service. However, because HARP is a “specialty loan”, you may want to limit your shopping with reputable lenders that know how to specifically handle HARP loans.

What are the costs to refinance via the HARP program?

Closing costs for HARP refinances should be no different than for any other mortgage. You may pay points, you may pay closing costs, you may pay neither. How your mortgage rate and loan fees are structured is between you and your loan officer. You can even opt for a zero-cost HARP refinance. Ask your loan officer about it.

What does the term “DU Refi Plus” mean?

“DU Refi Plus” is the brand name Fannie Mae assigned to its particular flavor of the HARP mortgage program. “DU” stands for Desktop Underwriter. It’s a software program that simulates mortgage underwriting. “Refi Plus” is a gimmicky-sounding term that could have been anything. The name has been trademarked, however.

What does the term “Relief Refinance” mean?

“Relief Refinance” is the Freddie Mac equivalent of DU Refi+.

My lender tells me that my loan was denied because of an EA-II Approval. What does that mean?

EA-II (pronounced : Ee Ay Two) is an automated mortgage approval code. It stands for Expanded Approval (Level II) and means that the loan meets the program’s eligibility standards, but that the file’s combined risk is too high to be approved. Some lenders will accept EA-II findings for a HARP loan. Many more will not.

My lender tells me that my loan was denied because of an EA-III Approval. What does that mean?

EA-II (pronounced : Ee Ay Three) is an automated mortgage approval code. It stands for Expanded Approval (Level III) and means that the loan meets the program’s eligibility standards, but that the file’s combined risk is too high to be approved. Some lenders will accept EA-III findings for a HARP loan. Many more will not.

My lender denied my HARP mortgage because my LTV is too high. What do I do?

Different banks are using different variations of the HARP 2.0 program. The edits are subtle, but they’re enough to cause some people to get denied who should otherwise have been approved. If you’ve been turned down for HARP, just try with a different bank.

I have a 40-year mortgage. Can I use the HARP program?

Yes, if you have a 40-year mortgage, you can use HARP. You must make sure that you mortgage is backed by Fannie Mae or Freddie Mac, though, and that you meet all other eligibility requirements.

My lender says its not set up for Freddie Mac. How do I do a HARP loan?

Not every bank is participating in the HARP 2.0 program. If you’ve been told that your bank can’t or won’t help you, just try with a different bank. There are many banks that are participating in the program.

When does the HARP program end?

If you are HARP-eligible, you must close on your mortgage prior to January 1, 2014

 

Lastly, don’t forget! The Home Affordable Refinance Program is not meant to save a home from foreclosure. It’s meant to give underwater homeowners a chance to refinance without paying PMI. If you need foreclosure help, call your current loan servicer immediately.

 

During a White House news conference, the president was asked what his administration will be doing in the next couple of months to spur economic growth.

“I would love to say that when Congress comes back – they’ve got a week or 10 days before they go out and start campaigning again — that we’re going to see a flurry of action. I can’t guarantee that,” Obama responded.

“We’re going to be pushing Congress to see if they can pass a refinancing bill that puts $3,000 into the pockets of the average family who hasn’t yet refinanced their mortgage. That’s a big deal,” he added.

Obama said that with historically low interest rates, and with many families owing more than the value of their homes, it makes sense to ease access to refinancing.

Three different refinancing bills are under consideration by the Senate Banking Committee, but Republicans and Democrats have so far been unable to reach an agreement to proceed on any of the measures.

Even if the Senate manage to pass refinancing legislation, it appears unlikely to pass the Republican-controlled House before the legislative clock expires at the end of the year.

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