The Home Affordable Refinance Program FAQ | Underwater On ...

The Home Affordable Refinance Program (HARP) ?ll?w? owners of underwater homes t? refinance to today?s low interest rates. Refinancing is typically not p?ss?ble f?r owners w?t? l?tt?? ?r negative equity. The key requirement f?r HARP eligibility i? that t?e home loans must b? owned b? Fannie Mae ?r Freddie Mac.

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The Federal Housing Finance Agency (FHFA) and Administration?s hopes f?r HARP ?? it wi?l b?t? stabilize the housing market ?nd boost th? o?era?? economy by putting extra dollars in th? pockets ?f consumers who are lik?l? to spend them. The FHFA is conservator ?f Fannie Mae and Freddie Mac, ?nd ?s th? chief regulator ?f Fannie, Freddie, and t?e 14 housing-related GSEs ?nd Federal Home Loan Banks.

Mortgage experts ?re optimistic ?b?ut t?e n?w HARP. ?Although t??r? i? st?ll a good deal of uncertainty surrounding t?? specifics ?f h?w t?? expanded HARP program will b? implemented at t?e individual lender level, t?? November 15 announcements from Fannie and Freddie d? provide a source ?f encouragement for t?e equity challenged segment ?f th? market,? ?a?d Peter Citera, vice president ?t Chicago Bancorp and mortgage education director at th? Real Estate Institute.

The Home Affordable Refinance Program-?HARP At ? Glance

Approximately 4 million Fannie and Freddie borrowers owe more ?n t??ir mortgage t??n t??ir homes ?r? worth. Across t?? US, n?ar?y 11 million ?r? underwater, or ?bout 22.5% ?f ?ll outstanding loans, a???rding to CoreLogic, a data provider to mortgage underwriters. About 2.4 million hold ??s? th?n 5% equity ?n th??r homes.

HARP h?? changed ov?r time. In October 2011, th? Obama Administration announced comprehensive rules f?r th? new HARP, w?i?h people in t?? industry called ?HARP 2.0.? In November, t?? Federal Housing Finance Agency (FHFA) expanded HARP and announced updated guidelines, wh??? ?re discussed below. On March 19, th? start of t?? automated loan approval systems expanded homeowner?s choices ?n lenders.

Apply for a HARP 2.0 Refinance here

HARP a?l?ws homeowners facing difficulties refinancing t??ir mortgage t?r?ug? conventional methods to apply for ? refinance of th?ir mortgage. A homeowner that i? current w?th t??ir monthly payments but unable to refinance due to ? drop in the ??lu? ?s t?? typical prime candidate for t?? HARP program. The ultimate goal is to all?w a homeowner t? d? a mortgage refinance f?r a lower interest rate and overal? monthly payment. Here ar? th? general eligibility guidelines f?r HARP:

There is no loan-to-value cap in th? n?w HARP, for fixed-rate loans. This i? the m?st significant change of HARP 2.0. Under previous versions ?f HARP, th? LTV ??u?d n?t exceed 125%.

March 2012 Update: Perhaps the biggest news in th? November 2011 announcement b? Fannie Mae ?nd Freddie Mac w?s that HARP 2.0 would ?l?ow f?r unlimited LTV loans. This w?nt int? effect in December 2011 f?r loans processed by th? original lender thr?ugh th? manual underwriting systems. With t?e opening of t?? automated systems in March 19th th? expectation wa? that lenders w?u?d apply t???? standards t? ?l? n?w HARP loan applications. The big surprise, and disappointment f?r many, ?? that ?om? ?f the lenders ?a?e issued stricter guidelines t?at limit t?? LTV t? t?e previous HARP 1.0 125% level or lower. Two examples ?r? Quicken Loans and New Penn.

At the time ??u apply, y?u ?r? current on ?our mortgage payments. You ??n have on? 30-day late payment ?n t?e past 12 months, but n?n? within th? past s?x months.
You ha?e ? reasonable ability to pay th? new mortgage payments. Editor?s note: Fannie Mae removed t?? ?reasonable ability t? pay? clause.
The refinance improves th? long-term affordability or stability of ?our loan.
HARP Changes for Lenders & Effects ?n Borrowers

The f?l?owing ?s ? summary of key ch?ng?s found in HARP 2.0. Some key underwriting details ?r? n?t ??t announced, and are expected to be released befor? March 2012.

Limited Liability
What?s new: A key provision ?f the n?w HARP i? th?t ?t limits lenders? liability in cases ?f loan default. Essentially, Fannie and Freddie w?l? n?t force th? lender to buy back ? non-performing loan.

Effect ?n you: This change shou?d greatly expand HARP?s reach. Lenders w?l? b? much more eager to offer HARP loans, w??r? th?? were previously reluctant. With m?re lenders participating, you will ??ve ?n easier time gett?ng a HARP mortgage.

Lender Fees Dropped
What?s new: Fees t??t Fannie ?nd Freddie charge lenders f?r high LTV loans are being cut.

Effect ?n you: The reduced fees ?r? passed on to you, making your loan cheaper. If ??u ar? financing t? a 15-year ?r 20-year loan, t?? fees are cut ?v?n further.

Income Requirements Relaxed
What?s new: As long as your new HARP monthly payment i? not m?r? th?n 20% greater t??n ??ur current payment, specific credit ?nd income guidelines do not apply. The lender will have t? determine th?t t?? borrower ?s ?n ?acceptable credit risk? (and what that means i? y?t to b? determined).

Effect ?n you: A high DTI ?? not ?n?ugh t? automatically disqualify ? borrower. Also, ?f ?our family is now a one-income family wh?n ?t wa? a two-income family on t?? original loan, you onl? h?v? t? show proof ?f ?ne income, ?s opposed to conventional loans where ?ll borrowers listed on t?? application mu?t document income.

December 2011 Update: HARP 2.0 debt-to-income requirements ???? changed. According to ? Fannie Mae announcement ?n December 20th, lenders wi?l n?t longer ???? t? demonstrate t??t th? borrowers ha?e a ?reasonable ability t? pay, unl??? th? loan payment increases by 20% ?r more.? This applies on?? t? loans borrowers d? w?t? t?eir current lenders t?r?ugh the manually underwritten Refi Plus system. Loan applications t??t g? thr?ugh t?e automated DU system must meet t?e basic DU 45% maximum debt-to-income requirement.

Credit Score Requirements Relaxed
What?s new: The lender wi?l ???? t? determine th?t t?? borrower ?? ?n ?acceptable credit risk? (and what that means ?s ?et t? be determined).

Effect ?n you: A low credit score ?? n?t ?n?ugh to automatically disqualify ? borrower.

March 2012 Update: ?It i? important f?r borrowers t? be aware t?at individual lenders are implementing the?r own underwriting overlays,? s??d Craig Repmann, managing partner, Heritage Mortgage Banking Corp. ?For e?am??e Fannie ?nd Freddie do n?t h?ve a FICO score requirement to qualify for a HARP mortgage, but m?st lenders ?re requiring ? minimum FICO score. It ?? go?ng to be difficult for borrowers with ? FICO score below 620 to qualify for HARP 2.0. There are ??m? lenders out th?re d??ng HARP 2.0 w?t? FICO scores below 620, but ?t w??? take ??me effort t? locate th??? lenders.?

Underwriting Requirements Relaxed
What?s n?w No. 1: Mortgage Payment History: A HARP lender ??n approve ? loan th?t ??? ?ne late mortgage payment in past 12 months, a? long as ?t did n?t take place in the ?a?t ??x months.

Effect on you: You won?t b? counted ?ut for ? mortgage late, w?en t??t could norma??y eliminate ?our ability t? g?t refinanced at t?? lowest rates available. If y?u h??e ? recent mortgage late, you can st?ll apply for HARP, on?e ?ou meet t?? relaxed mortgage late requirements.

What?s n?w No. 2: Relaxed Foreclosure & Bankruptcy rules: Your HARP loan ?ould b? approved, reg?rd?ess ?f how recently a borrower filed bankruptcy ?r experienced ? foreclosure.

Effect ?n you: Normally, if y?u filed for bankruptcy ?r experienced a foreclosure ?ou w?u?d h?v? to wait years b?fore ?ou ??uld successfully refinance.

Occupancy Requirements Relaxed
What?s new: Owner Occupancy: HARP loans ar? no longer restricted only to owner-occupants.

Effect ?n you: You ?an now us? HARP to refinance your sec?nd home or investment property.

Lenders Must Show ? Borrower Benefits
What?s new: Lenders must show t?at the HARP mortgage borrower derives one ?r more ?f t?e fo???w?ng f?ur benefits ?n th? new loan:

Reduce th? size of t?e monthly payment
Change t? a m?re stable loan product, ?uch ?? moving fr?m ?n adjustable-rate mortgage t? a fixed-rate mortgage
Reduce th? interest rate
Reduce t?e loan amortization term (moving to ? shorter-term loan)
Relaxed Condominium Requirements
What?s new: HARP eligibility us?d t? require th?t no m?r? t??n 10% of units in t?e complex be owned by ?ne person and t??t n? m?r? t??n 20% ?f owners ?n t?? complex b? b?hind on t??ir HOA dues. These requirements ?r? n?w removed.

Effect on you: More condo owners w??l now qualify f?r HARP. If ?ou ?wn a condo, your qualifying f?r t?e HARP program ?s n? longer dependent ?n your neighbors? finances.

?Condominium owners ??ve ??rh??s t?e b?st reason to b? optimistic; lenders are be?ng relieved ?f the responsibility (for HARP refinance loans only) t? ensure t?at condo projects meet the ?ft?n strict project approval requirements of Fannie Mae and Freddie Mac,? Citera said. ?Borrowers living in condominium projects that ???? ??en ? sharp increase in t?? number ?f renters, or those that h??? experienced s?m? level ?f budgetary stress, wi?? be mu?? m?re ?ik?l? to find relief und?r HARP 2.0 t??n th?? ??v? under existing programs (as long ?s the?r loans ar? owned by Fannie ?r Freddie).?

Recourse, Non-recourse, and Anti-deficiency

Bills.com believes th? bulk ?f HARP mortgages wil? occur after March, 2012 w?en Fannie ?nd Freddie update t?e?r automated loan underwriting/approval software. Before then lenders ??uld approve HARP mortgages by underwriting t?e loans manually. Loans underwritten manually expose t?? lender t? greater risk b?caus? ?f a manually underwritten loan defaults, t?? lender i? required t? buy back t?? loan.

Before refinancing, borrowers ?hould kn?w whet??r t?eir current loan ?s ? recourse or non-recourse loan ?nd ??s? be familiar wit? their state?s anti-deficiency laws. Refinancing ? non-recourse loan c?u?d expose th? borrower to responsibility for a potentially huge financial obligation w?ere no such obligation curr?ntl? exists.

In late January 2012, President Obama proposed a similar plan for non-GSE home loans. See Obama Refinance Plan for more information on this proposal.

More HARP updates will be released bot? b? lenders ?nd by Fannie ?nd Freddie, ?o k?e? checking wit? Bills.com to stay updated ?n details of th? n?w HARP program.

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