The HARP Program (Home Affordable Refinance Program) has been extended until December 31st, 2015. This isn’t a surprise as most people thought the government refinance program would be extended. Has anything done to help underwater homeowners not in the loving embrace of Fannie Mae and Freddie Mac? Here’s what you need to know about the latest changes to the HARP program to get your home refinanced with the best mortgage lenders.
HARP Program Updates
The Home Affordable Refinance Program (HARP Program) was set to expire at the end of 2013. The Federal Housing Finance Agency extended it with hopes of helping millions of underwater homeowners waiting to get in the HARP program. Director Edward DeMarco was quoted saying the program is being extended to allow more underwater homeowners access to today’s best mortgage rates.
That sounds good, so what’s the problem preventing millions from qualifying for the Home Affordable Refinance Program?
The Federal Housing Finance Agency (FHFA) is planning to launch a nationwide advertising campaign to let you know all about the HARP program. The Home Affordable Refinance Program has been around for years and the percentage of underwater homeowners who don’t know about it has got to be very small. Awareness, or a lack of is not the HARP program’s problem.
The number of underwater homeowners out there that need educating on the benefits of refinancing their six percent or higher mortgage loans is very small considering that 21 percent of the home loans refinanced in January were HARP program loans.
What’s Wrong With The HARP Program?
The problem isn’t a lack of awareness, that’s for sure. The Home Affordable Refinance Program was designed to make it easy for underwater homeowners to qualify. Are you current on your payments? No problem, as President Obama put it you’re a “responsible homeowner” and the government wants to help you get right-side up in your mortgage loan.
The problem is that millions of underwater mortgage loans are held by private lenders like Wells Fargo and Bank of America. Because these privately held mortgage loans are not backed by Fannie Mae or Freddie Mac they are not eligible for the HARP program.
Adding insult to injury, not only does the government have to back your mortgage with Fannie Mae or Freddie Mac, they need to have done so prior to June 1st, 2009. These two requirements are responsible for leaving millions of responsible American homeowners out in the cold.
If you’re an underwater homeowner not covered by Fannie Mae or Freddie Mac your only option thus far has been cash-in refinancing. This means you’re going to pay down the balance on your mortgage to a respectable loan-to-value ratio at closing in order to qualify. The idea sounds dumb on several levels because if you had the cash to pay down your mortgage you wouldn’t be underwater in the first place.
Hope For Non-Government Back Mortgage Holders
The FHFA, President Obama, and the Congress have done nothing to ease HARP program requirements to allow re-HARPing or privately held mortgages to qualify. But there is a new (rehashed really) draft of HARP 3.0 making its way through Congress you should know about.
HARP Program 3.0 Responsible Homeowners Act of 2013
Senators Barbara Boxer and Robert Menendez have updated their failed Responsible Homeowners Act of 2012. This new bill proses to eliminate HARP program closing costs, including the appraisal while making qualifying easier.
This bill proposes to do this by removing income and employment verification for all HARP program applicants. These proposals are nothing new and do little to reduce or eliminate lender overlays. HARP program participation is voluntary and many lenders use program overlays to limit their risk. These overlays are lender specific rules enforced for qualifying like limiting loan-to-value to 125%, even though HARP 2.0 does not impose limits on loan-to-value-ratio.
Last year’s bill failed to make it to President Obama’s desk. If this year’s attempt will go the distance is anyone’s guess. Whether or not Congress or the President removes or modifies the Fannie Mae or Freddie Mac requirement is anyone’s guess as well.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
