The Home Affordable Refinance Program (HARP) was designed to help homeowners, whose home values have fallen, to refinance their mortgage to take advantage of the historically low rates we have been experiencing lately. The changes to the HARP program should sidestep a lot of the reasons lenders were unwilling or unable to help more homeowners.
Under HARP, homeowners who had little to no equity, or were upside down on their properties, could refinance their mortgage at today’s low rates. If a borrower did not have mortgage insurance originally, it would not be required on the new loan even if the new loan to value ratio (LTV) would normally require it. And, if a borrower did have mortgage insurance, the new mortgage insurance requirement would be at the same level of coverage they had before. And, the borrower could refinance even if their first mortgage was up to 125% of the value of the home.
With the changes to HARP that 125% limitation is lifted – allowing a borrower to refinance their mortgage regardless of how much negative equity they have in the property. This will open the program to more borrowers excluded under the original HARP.
But, I’ve read that many lenders did not participate in the original HARP – why will this be any different?
Under HARP, many lenders would only refinance borrowers up to a 95% LTV. Some would go to 105% LTV but very few would go to the maximum of 125% LTV. Why? Because, generally, when a mortgage is refinanced by a lender, the representations and warranties attached to the original loan and property are carried over to the new lender. So, the investors (Fannie Mae and Freddie Mac) can force the lender to buy back that mortgage due to defects overlooked by the previous lender. Many lenders were not willing to take that risk, especially on a refinance with no or negative equity. Therefore, the few lenders that were willing to take the risk of a 125% LTV refinance only took that risk on loans that they were already servicing and therefore already exposed to the buyback risk.
Under the changes to HARP, Fannie Mae and Freddie Mac will waive the reps and warranties for refinancing mortgage that are already owned by Fannie Mae and Freddie Mac and were originated before June 1, 2009. Even though this may increase the risk to Fannie/Freddie, the increase in risk should be negligible. Experts say that most defects that trigger reps and warranties occur in the first couple years of the mortgage. Also, in order to qualify for the program, borrower must be current on the loan, have no late payments in the past 6 months, and at most one late payment in the past twelve months. These borrowers pose less of a default risk than those with recent late payments on their mortgage.
Not all of the guidelines and details have been completed. Fannie Mae and Freddie Mac are going to have the new HARP guidelines finalized b November 15, 2011 and HARP should be live by December 1, 2100.
Stay tuned to Barkerblog.com for more information on HARP 2.0 as it becomes available.
If you think you can benefit from these changes, contact me ASAP so we can get your application started – this is sure to create a lot of demand for refinancing and ledners can easily get overloaded.
I can be reached at BarkerLoans@gmail.com or 708.473.7688. Or, if you want to apply online, please go to www.BarkerLoans.com and complete the full application. There is no cost or obligation to apply.
