HARP 3.0 Is Dead, Long Live The Home Affordable Refinance Program

Yup, I said it, HARP 3.0 is dead. It was never more than a rumor but HARP 3.0 gave hope to millions of non-government insured, underwater homeowners. Don’t get me wrong, HARP 2.0 is the best thing to happen to homeownership since the VA mortgage loan, but it left millions of deserving people out in the cold. When President Obama removed the 125% loan-to-value cap the Home Affordable Refinance Program lived up to its potential…almost. Here’s the latest HARP 3.0 news and something you can do today to help bring HARP 3.0 back from the brink.

HARP 3.0 Was Supposed To Happen But…

Turn on the TV and the news is filled with fallout from the fiscal cliff deal and gun control. Talk of HARP 2.0 is a distant memory from 2012. The program, which helps underwater homeowners refinance home loans that were until recently too toxic for lenders, is the last thing on anyone’s mind in Washington.

Who is the Home Affordable Refinance Program for?

As I mentioned, the biggest letdown of HARP 2.0 was that it did nothing to remove the requirement that your home loan be backed by Fannie Mae or Freddie Mac prior June 1st, 2009. If your home loan isn’t backed by the government and is privately held by someone like Wells Fargo or Bank of America you’re out of luck.

If President Obama and Congress remove the government insured mortgage requirement with HARP 3.0 it would help millions of deserving, financially responsible homeowners.

Here’s a list of groups of homeowners that stand to benefit from HARP 3.0:

  • Self-employed Homeowners
  • If you’re self-employed and can verify your income with tax returns and bank statements but can’t qualify for refinancing because of your loan-to-value ratio HARP 3.0 could help you.

  • Homeowners With Bad Credit Mortgage Loans
  • If you’re underwater in a sub-prime mortgage the deck has really been stacked against you. Changes to this government refinance program offer a glimmer of hope but have yet to materialize.

  • Jumbo Mortgage Holders
  • Much like underwater sub-prime mortgage holders, there’s not much more toxic to lenders than an underwater jumbo mortgage loan.

  • Stated-Income Mortgage Loans
  • If you purchased your home with a stated-income home loan and cannot qualify for refinancing based on verified income HARP 3.0 could help.

There are millions of underwater homeowners in the U.S. left out in the cold with the original government refinance program and HARP 2.0 that stand to benefit from a newly revised Home Affordable Refinance Program.

Wait, I thought you said HARP 3.0 was dead?

Any proposal in Washington that isn’t getting lawmaker attention is dead, so to speak. With gun control on the forefront of the Whitehouse’s agenda there’s little hope for HARP 3.0 coming anytime soon. Also, HARP is set to expire at the end of this year unless extended by the President or Congress.

I realize this isn’t the news you were hoping for but there are things you can do to help yourself in the absence of a revised Home Affordable Refinance Program.

Keep calm and carry on…

What’s an underwater homeowner to do? First of all, keep making those mortgage payments on time.

In fact, make all of your payments on time including those credit cards. Spend some time reviewing your credit reports for errors. You can get free copies of all three of your credit files by visiting the government-mandated website AnnualCreditReport.com. If you find mistakes all three credit bureaus (Equifax, TransUnion and Experien) process online disputes. Dispute all inaccurate or outdated information you find in your credit reports.

Finally, maintain the highest possible credit score by keeping the balances on your credit cards below 30% of your limit. This is doubly important for any store charge accounts.

You can help resurrect HARP 3.0

There’s a petition circulating social media today calling for President Obama to formally extend the Home Affordable Refinance Program and allow reHARPING. This could go along way to getting HARP 3.0 back on the minds of lawmakers in Washington.

You can find the petition on the WhiteHouse.gov website under “We the People…” using this link:

https://petitions.whitehouse.gov/petition/make-formal-request-fhfa-eliminate-securitization-cut-date-harp-eligibility-and-allow-re-harping/BlPYbvZw

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Is a HARP Refinance Right For You?

Is the government refinance program known as HARP 2.0 right for you? The Home Affordable Refinance Program (HARP 2.0) has undergone a number of revisions intended to get more people qualified. If you have less than 80% equity in your home and are struggling this government refinance program is worth looking at. Here are the basics you need to know about getting your HARP 2.0 application approved.

Am I Eligible for HARP 2.0?

The deciding factor for most folks is whether or not Fannie Mae or Freddie Mac purchased their mortgage before June 1st, 2009. If your mortgage is held privately by a lender like Bank of America or Wells Fargo you are not eligible for HARP 2.0.

If you’re not sure if your mortgage is privately held both Fannie Mae and Freddie Mac have a way of checking online.

Fannie Mae Loan Lookup:

http://www.knowyouroptions.com/loanlookup

Freddie Mac HARP Eligibility Lookup:

http://www.freddiemac.com/avoidforeclosure/harp_eligibility.html

HARP 3.0 is rumored to remove the Fannie Mae or Freddie Mac government refinance program requirement; however, these changes have yet to materialize.

Once you verify that Fannie Mae or Freddie Mac have your mortgage you need to be current on all your payments for the last six months. Beyond the six month requirement you must also have made 11 of your last 12 payments on time and have less than 20% equity to qualify.

I’m HARP 2.0 Eligible, Now What?

HARP is set to expire at the end of 2013. The next step for you once you’ve determined that you’re HARP 2.0 eligible is to shop for a lender. This is where it gets tricky for many homeowners. What you might discover is that even though you’re qualified for this government refinance program is that your lender denies your application.

What the #$%@?! I’m eligible, why was my HARP refinance application denied?!

Lender Overlays: The Fly In Your Soup

HARP 2.0 has come a long way to get underwater homeowners qualified for mortgage refinancing. Where it hasn’t made great strides is limiting risk for mortgage lenders. Overlays are special rules lenders use to limit their risk with the program. These rules include limits on loan-to-value, minimum credit score and income. It’s not uncommon for homeowners with 125% loan-to-value or higher to find their current lender denies a HARP refinance application.

Was Your HARP Refinance Denied? Keep Trying…

Not all mortgage lenders enforce overlays with the Home Affordable Refinance Program and the ones that do all play by their own rules. Just because one lender denies your HARP application doesn’t mean another one will. That’s why shopping around for a government refinance program approval is so important.

Remember once you’re approved you’ll still be required to pay fees to close on your HARP refinance.

Just like lender overlays closing costs vary widely from one lender to the next and some fees are negotiable. The loan origination fee is an example of one negotiable closing cost that you’ll want to pay as little as possible on your HARP refinance. Other fees like discount points drive up your out-of-pocket costs reducing the benefit you’re getting from today’s low mortgage rates.

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You can learn more about getting the best deal on your HARP refinance by checking out my free Underground Mortgage Videos.

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Underwater Mortgage Help Update

Underwater homeowners in the United States currently owe 1.2 trillion dollars more than their homes are worth according to one news source. Considering that the Gross Domestic Product (GDP) of the United States is around 14 trillion dollars this problem is of epidemic proportion. Is there underwater mortgage help for the average homeowner?

Government Underwater Mortgage Help

Government refinance programs like the Home Affordable Refinance Program (HARP) offer a glimmer of hope; however, because lender participation is voluntary this program has yet to live up to its potential. According to economists, nearly 32% of American homeowners are upside down and are in need of underwater mortgage help.

If you bought your home in Las Vegas and are underwater there’s a good chance you now owe double what your home is worth. As you can see from the map above, other large metropolitan areas like Detroit aren’t looking much better.

Good News For Underwater Homeowners?

Economists state that while one in three homeowners in the US needs underwater mortgage help, nine out of 10 of these are keeping up on their payments. The kind of losses from owing more than your home is worth generally only affects the homeowner when they try to refinance or sell their home. Underwater homeowners facing foreclosure typically walk away from their homes.

In his recent State of the Union Address, President Obama is calling for all responsible homeowners to refinance. By responsible he means all those who are keeping up on their payments. If you’re underwater mortgage refinancing hasn’t been an option; however, recent and proposed changes to the Home Affordable Refinance Program (HARP) are trying to change this.

HARP 2.0 & Beyond

The original Home Affordable Refinance Program had a restrictive 125% loan-to-value limit. The majority of homeowners are above the limit to qualify so while the program sounded good on paper, it didn’t help the people that need it the most. At the end of 2012 President Obama announced HARP 2.0 which removed this loan-to-value limit completely.

Has it helped? Unfortunately it’s been too little, too late. Because lender participation in the Home Affordable Refinance Program is voluntary, most lenders have imposed their own loan-to-value limits, many limiting to 105% LTV.

Fannie Mae & Freddie Mac Down & Out?

Another problem with HARP is that in order to be eligible your home loan had to have been picked up by Fannie Mae or Freddie Mac before May 31st, of 2009. If your mortgage isn’t backed by Fannie Mae or Freddie Mac HARP simply isn’t an option for you.

Rumors have it that HARP 3.0 would supposedly eliminate the Home Affordable Refinance Program Fannie Mae and Freddie Mac Requirement; however, proposed legislation found in the Responsible Homeowner Act of 2012 still requires that your home mortgage is backed by Fannie Mae or Freddie Mac.

What’s a responsible homeowner to do? Keep making your payments on time and shop for lenders that don’t enforce their own loan-to-value requirements for HARP. Community based credit unions are a good starting point for underwater mortgage help.

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You can learn more about getting the best deal on your next home loan by avoiding unnecessary discount points and junk fees by checking out my free Underground Mortgage Videos.

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The Making Home Affordable Program

President Obama’s Home Affordable Refinance Program continues to evolve to make more homeowners eligible; however, many banks are still playing by their own rules. The Making Home Affordable refinance program was part of the 2009 stimulus package and was intended to help millions of underwater homeowners take advantage of today’s low refinance mortgage rates.

While the program looks great on paper banks and mortgage lenders have been hesitant to adopt HARP guidelines as the government intended. Most lenders are enforcing their own Loan-to-Value requirements ranging from 105-125 percent even though HARP 2.0 removes the LTV requirement.

Many homeowners are finding out the hard way that just because you’re qualified under the Home Affordable Refinance Program guidelines finding a lender to approve you can be difficult. Don’t worry, if you’ve been turned down for your HARP refinance there are options available to you.

HARP 2.0 & The Making Home Affordable Program

The Home Affordable Refinance Program (HARP) is a subsection of the Home Affordable Refinance Program. This program was supposed to help seven million underwater homeowners lower their payments with today’s low refinance rates. The goal is to boost the economy by stimulating spending by homeowners with lower mortgage payments.

The problem with HARP is that mortgage underwriting standards enforced by banks and lenders restrict the number of applicants being approved. In its original form the Making Home Affordable program helped fewer than one million underwater homeowners.

HARP 2.0 came along at the end of 2011 and removed the original 125% loan-to-value requirement. The intent was to reach the six million homeowners left out the original Making Home Affordable Program.

While the government refinance program guidelines have been greatly relaxed under HARP 2.0, not many banks and lenders have adopted the government’s guidelines, especially when it comes to loan-to-value, which has resulted in the latest tweak to the Making Home Affordable Program.

HARP 2.0 With a Side of Private Mortgage Insurance

Under the original Making Home Affordable Program if you had Private Mortgage Insurance (PMI) you were most likely denied refinancing. It didn’t matter if you had borrower-paid PMI or LPMI (Lender Paid Private Mortgage Insurance); if you had PMI your HARP refinance never made it to closing.

HARP 2.0 smashes the PMI barrier which means you should be able to refinance if Private Mortgage Insurance held you back in the past. While it’s true banks and mortgage lenders are still playing by their own rules when it comes to the Making Home Affordable Program, loan-to-value, and PMI, there are lenders out there that will approve your application with PMI or LPMI.

If your HARP application is denied due to PMI or your loan-to-value ratio, try reapplying with a different lender.

Community-based credit unions are an excellent starting point when shopping for HARP approval. If you get turned down for the Making Home Affordable refinance program, don’t give up. Keep applying and you will find banks and lenders willing to approve your HARP 2.0 application.

HARP 2.5 In The Works?

Rumors of HARP 3.0 seem to be left behind as members of the Senate are working to draft the Responsible Homeowner Act of 2012. This proposed legislation allows homeowners backed by Fannie Mae or Freddie Mac to essentially streamline refinance their homes. FHA homeowners have had the streamline refinance option available for years, allowing them to refinance without a home appraisal, verifying employment or documenting income.

The HARP 3.0 rumors offered a glimmer of home for homeowners with non-Fannie and Freddie backed mortgages but the proposed legislation appears to retain the requirement. Whatever form the Responsible Homeowner Act of 2012 ultimately takes the bill is a long way from being approved in the House and the Senate and being signed into law by the President. Stay tuned for more news about HARP 2.0, 2,5 and the Responsible Homeowner Act.

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What is Streamline Refinance?

If you’re considering refinancing you’re likely to run across the term Streamline Refinance. What is a streamline refinance and does it apply to you? Despite government refinance programs like HARP 2.0, many people are having trouble qualifying for mortgage refinancing. Streamline refinance is a quick and easy alternative to mortgage refinance loans with lower costs and qualifications. Here are the basics you need to know if a streamline refinance is available to you.

Streamline Refinance Definition

The term streamline refinance usually applies to FHA home loans. The VA and USDA have their own refinance programs with different names but I’ll get to those in a moment. Streamline refinance is a way of taking advantage of today’s low refinance mortgage rates with less legwork and paperwork than conventional mortgage refinancing. For some homeowners this will be an option where their application would otherwise be denied.

There are requirements that must be met to qualify depending on the program. With the FHA for example, there must be a tangible benefit to refinancing. Lowering your interest rate, changing from a fixed rate mortgage to an adjustable rate mortgage or lowering your term length from 30-years to 15-years are all examples of tangible benefits.

In addition to demonstrating tangible benefit you must be current on your payments. There are government programs for homeowners who are unable to make payments (the Home Affordable Modification Program HAMP is one such program); however, with any government refinance program you must not have late payments.

Streamline refinance programs will not allow you to take cash out. If your goal for mortgage refinancing is to borrow against your home equity a streamline refinance is not the program for you.

FHA Streamline Refinance Program

One of the advantages of an FHA streamline refinance is that income and employment verification may not be required. There are also minimal credit requirements to meet; although, the FHA is toying with the notion of not approving homeowners that have active collection accounts on their credit reports.

President Obama lowered mortgage insurance premiums for FHA Streamline Refinance to make the program available to more homeowners.

Streamline refinance programs cut through red-tape and allow for less paperwork, faster underwriting, and lower fees. In most cases you will not be required to pay for a new appraisal. This is a rundown of the guidelines set in place by the FHA. Individual lenders can impose their own requirements so if your existing lender is giving you a hard time you can kick them to the curb and find another lender.

If your existing mortgage is an FHA home loan and is in good standing you can lower your payment and save a lot of cash at closing with the FHA streamline refinance. If you’re not with the FHA check with your lender as many offer similar programs.

VA Streamline Refinance

The VA doesn’t call the program by this name; however, the agency’s Interest Rate Reduction Refinancing Loan (IRRRL) does the same thing. The Veteran’s Administration has the same basic rules for the IRRRL program and taking cash out is not allowed. You will not need a new appraisal or income/credit verification and you have the option of rolling your closing costs into your balance. You don’t need to get a new certificate of eligibility from the VA so the process is much quicker.

HARP 2.0 Program Requirements

HARP isn’t a streamline refinance program but a government refinance program for underwater homeowners. The program requirements under HARP 2.0 allow for unlimited loan-to-value ratios; however, we’re finding that many lenders are imposing their own LTV requirements. If you’re finding your HARP application is still being denied because of your LTV try shopping around for a different lender. Community based credit unions are an excellent starting place as they have less stringent in-house underwriting requirements.

The basic requirements for the Home Affordable Refinance Program (HARP 2.0) are that your home loan is owned by Freddie Mac or Fannie Mae and they must have purchased it before May 31st, 2009. You must have less than 20% equity in your home to qualify for HARP. Lastly, you must be current on your payments with zero late payments in the last six months and only one late payment in the last year.

HARP 2.0 doesn’t have the same advantage as a streamline refinance when it comes to the paperwork and lender fees so it’s important to shop around comparing things like the origination fee.

Shop Around for the Best Deal

No matter what type of mortgage refinancing you’re in the market for it’s important to shop around for the best mortgage lenders. One of the most common mortgage mistakes is focusing only on getting the lowest refinance rates at the expense of fees.

Overpaying the loan origination fee or paying unnecessary discount points will make it much more difficult, even impossible to recoup your out-of-pocket expenses. If you don’t break even on your closing costs you’re going to be losing money no matter how great your interest rate.

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