Harp 3.0 FAQ: What You Need to Know

Version 2 of the Home Affordable Refinance Program has been in the books for a little over a month and already rumors are swirling of HARP 3.0. This government refinance program has helped just over a million homeowners to date, falling greatly short of its potential. Version 3 could help even more homeowners in need; however, there is still a dark cloud lingering over the program that needs to be addressed. Here’s what you need to know about HARP 3.0 to help you take advantage of today’s low refinance rates, even if you’ve been unable to qualify in the past.

HARP 3.0 Still Only Rumored

Word on the street is that members of the Senate Finance Committee and senior HUD officials have been meeting on the subject and are optimistic some kind of HARP program 3.0 legislation could be in the works by June. Furthermore, this HARP 3.0 legislation could remove the Fannie Mae & Freddie Mac requirement, a significant roadblock for many homeowners.

President Obama is calling for all “responsible homeowners” to refinance their homes under the Home Affordable Refinance Program with today’s low refinance rates and promised to submit legislation to Congress to make it happen in his State of the Union Address.

The most significant change rumored under HARP 3.0 is removing the securitized requirement with Fannie & Freddie. This is good news as a large number of underwater homeowners have been unable to participate in the program because they have privately held mortgage loans.

Lender Participation is Still an Issue

2012 saw version 2 of the Home Affordable Refinance Program which removed the 125% loan-to-value requirement preventing many underwater homeowners from participating. The problem is that most lenders turned around and imposed their own loan-to-value and minimum credit requirements.

Lender participation in the Home Affordable Refinance Program has always been voluntary and many are still smarting from the government bailouts largely due to bad mortgage debt. Unless Congress can sweeten the deal for lenders, removing the Fannie Mae/Freddie Mac requirement may not be enough to get people qualified. Because a program of this scope would require Congressional action the road to a bill could be difficult given Republicans are extremely critical of the President’s mortgage relief programs.

Government Refinance Program History

The Home Affordable Refinance Program is a rapidly evolving Government Refinance Program. Started in 2009 this government refinance program was part of the President’s economic stimulus efforts it was intended to help homeowners with negative-equity get right-side up with today’s low refinance rates; however, the program’s original requirements were too stringent to help those in need.

HARP 2.0 came along in 2012 and removed the 12% loan-to-value limit; however, many lenders imposed their own LTV requirements, effectively nullifying the President’s efforts.

Version 2 of the program had no income requirements, did not require employment verification, and had no credit or LTV requirements. The program was intended to remove roadblocks to qualifying for mortgage refinancing; however, most lenders imposed their own requirements for income, credit, and home equity.

Home Affordable Refinance Program Requirements

Here’s what you need to know to qualify for HARP:

1. You must have less than 80% equity
2. You must have made on-time payments for the last six months.
3. Fannie Mae or Freddie Mac must have acquired your loan prior to June 1st, 2009.

HARP 3.0 is rumored to remove the Fannie Mae/Freddie Mac requirement; however, without incentives to encourage further lender participation the programs reach may remain limited. When passed, HARP 3.0 could help homeowners with Jumbo Mortgages, hard hit by declining property values.

• We don’t yet know when congress with pass HARP 3.0 or what the legislation will look like.

When HARP 3.0 becomes final you can bet that borrower fees despite low refinance rates will be used as an incentive to boost lender participation. This is significant because the fees you pay closing on mortgage refinancing make or break the deal you’re getting. Even if you get qualified under the HARP 3.0 refinance program overpaying the loan origination fee or other closing costs could make refinancing a losing proposition.

Common junk fees you’ll want to avoid on any mortgage refinance transaction include application, processing, courier, and rate lock fees. You’ll still have the ability to shop around under HARP 3.0 and many community-based credit unions have the best deals when it comes to things like the loan origination fee.