HARP 3.0 Updates for Non-Government Insured Homeowners #MyRefi

Are you frustrated with President Obama’s Home Affordable Refinance Program? The requirement that Fannie Mae or Freddie Mac insure your mortgage is preventing millions of underwater homeowners from qualifying under HARP 2.0. The new program dubbed HARP 3.0 hasn’t passed yet but momentum in Washington seems to be building. Here’s an update on what we know about HARP 3.0 to date.

HARP 3.0 For Non-Government Insured Mortgage Loans

The basic requirements for the Home Affordable Refinane Program today are as follows:

1. You must have less than 20 percent equity in your home. (You’re underwater or very close).
2. You must not have any late payments during the past six months.
3. Fannie Mae or Freddie Mac must have insured your loan no later than June 1st, 2009.

The last requirement is what HARP 3.0 (called #myrefi by the Whitehouse) is expected to remove. The program would also be open to people with underwater jumbo mortgage loans.

Who is HARP 3.0 For?

When the new program is officially introduced it is expected to target these specific underwater borrower types:

• Self-employed homeowners with stated income home loans that have verifiable income on their tax returns.
• Homeowners with sub-prime mortgage loans that would have qualified for prime lending.
• Homeowners with jumbo mortgage loans that originally borrowed less than $625,000 and live in high cost regions of the country.
• Homeowners with stated income mortgage loans that are not self-employed.
• Anyone who has responsibly paid a bad-credit mortgage and can document sufficient income/assets.
• Underwater homeowners with subprime mortgages that have improved their credit scores since purchasing.

If and when HARP 3.0 passes there are millions of underwater homeowners that would qualify assuming there are sufficient incentives for lenders to approve their application for mortgage refinancing. One problem with HARP 2.0 is that many lenders have their own program overlays.

These overlays are lender enforced requirements for approval above and beyond what the government requires. Many lenders require a minimum credit score and maximum loan-to-value ratios ranging from 105% to 125%. It is believed that new government refinance program will include incentives/indemnification for lenders to approve qualified mortgage applicants without these overlays.

Refinance Mortgage Rate Shopping Is Still Important

If you’ve been waiting on the sidelines for HARP 3.0 to qualify for refinancing, mortgage rate shopping is still going to be important once you’re eligible. Just because you qualify for a government refinance program like HARP 3.0, FHA streamline refinance or the VA Interest Rate Reduction Refinance Loan (IRRRL) doesn’t mean lenders can’t overcharge you at closing.

The most important aspect of any mortgage refinance are the fees you pay at closing. Many homeowners make the common mortgage mistake of focusing on getting the lowest possible refinance rates at the expense of fees. Pay too much and you’ll never break even recouping your out-of-pocket expenses. The most frequently overpaid fees include the loan origination fee and discount points.

Where should you start shopping from today’s best mortgage lenders for HARP mortgage rates? I usually recommend people start mortgage rate shopping with community based credit unions as these lenders tend to offer the lowest origination fees and closing costs. Remember to always compare refinance rates and fees from quotes that do not include discount points when shopping for a new home loan.