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The Dark Side of HARP 2.0

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Unless you’ve been living under a rock you’ve heard about the changes President Obama made to the Home Affordable Refinance Program (HARP). The most notable change is removing the 125% loan-to-value requirement; however there are also incentives to boost lender participation.

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The old HARP program is widely considered a failure due the restrictive LTV requirements and a lack of lender participation. The Washington Post sheds some light on lender incentives that reveals a dark side of HARP 2.0.

HARP 2.0 Could Be a Boom for Lenders

Banks that participate in HARP 2.0 can basically charge whatever they like as far as refinance rates and fees. The incentives under HARP 2.0 are designed to encourage homeowners to stay with their existing lender. The Washington Post cites special benefits and extreme pricing power with the ability to charge higher refinance rates to homeowners resulting in massive profits from loan origination.

This particular analyst believes homeowners will have to pay a premium for loan origination fees and other lender closing costs. Higher mortgage refinance rates means higher payments and more cash out of your pocket at closing; however, desperate homeowners may be less likely to shop around for a better deal and stay with their existing lenders. The projected mortgage refinancing boom from HARP 2.0 coupled with new incentives could generate massive profits for lenders.

One reason the original HARP program failed was lack of participation. Higher mortgage refinance rates and fees will certainly drive lenders on the HARP 2.0 bandwagon, at the expense of homeowners.

Source: The Washington Post

http://www.washingtonpost.com/blogs/ezra-klein/post/how-banks-win-big-from-obamas-new-refinancing-program/2012/03/23/gIQAzWMpVS_blog.html

Do Your Homework First

President Obama may have given lenders a blank check when it comes to charging higher refinance mortgage rates and fees; however, HARP 2.0 is still a great program for underwater homeowners. If you’re considering mortgage refinancing under HARP you’ll want to shop around comparing both refinance rates and fees.

The reason fees are so important is that the closing costs decide how good of a deal you’re getting on your mortgage refi regardless of your interest rate. You’ll need to recoup these out-of-pocket expenses before benefiting from your new home loan. The less you pay at closing, the sooner you’ll break even.

You can learn more about getting the best deal for your next home loan by avoiding unnecessary lender fees and markup by checking out my free Underground Mortgage Videos.

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{ 1 comment… read it below or add one }

LARRY April 10, 2013 at 11:22 am

under the report on incentives-for-lenders it appears that this is for 2nd mortgages. And before that 1st mortgages that had a second on them.
So My question: Is it legal for CHASE or any other bank to refi a 1st mtg that’s never been late and that does not have a 2nd?

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