The HARP Program Strikes (Out) Again

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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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.

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Overturning Government Refinance Program Denials

Has your FHA Streamline, HARP 2.0, or VA IRRRL government refinance program application been denied? Despite easy qualification guidelines for streamline refinance programs many lenders are enforcing investor overlays, which are their own rules for approval. If your application for any of these government refinance programs has been denied thanks to overlays here’s what you can do to get your mortgage application approved.

Streamline Refinance Programs For Everyone

Until HARP 3.0, also known as #myrefi is approved there isn’t a streamline refinance program available for everyone. The three programs out there cover millions of homeowners; however, if you meet the minimum requirements to qualify you could still find your lender denying your application for streamline refinancing.

Here’s a quick rundown of the government refinance programs available today.

HARP 2.0 For Fannie Mae & Freddie Mac

If your mortgage loan is backed by Fannie Mae or Freddie Mac and you have very little or no equity then the Home Affordable Refinance Program (HARP version 2.0) is for you. As long as you’re current on you payments and Fannie Mae or Freddie Mac got ahold of your mortgage before June 1st of 2009, you should be HARP eligible.

HARP 2.0 removed the 125% loan to value ratio requirement to be eligible; however, most lenders are enforcing their own loan to value requirements as low as 105% in some cases.

The problem is that many lenders use these so called investor overlays to protect themselves from bad home loans. The government levies stiff penalties against lenders for writing bad home loans with any government refinance program so there is still significant risk for lenders with streamline mortgage refinancing.

FHA Streamline & VA IRRRL Mortgage Refinancing

If you have an FHA or VA home loan you won’t be HARP eligible because the FHA and VA have their own streamline refinance programs. Not having late payments is a common theme with any government refinance program so as long as you don’t have any 30-day late payments you should qualify despite credit, income, employment status or loan to value ratio. The VA streamline refinance works the same way and is called an Interest Rate Reduction Refinance Loan. The problem here again for both FHA streamline and the VA’s IRRRL are investor overlays.

Streamline Mortgage Refinancing Difficult

Existing government refinance programs are intended to make streamline refinancing widely available to American homeowners; however, very few are getting access to these programs. Many, but not all mortgage lenders enforce their own guidelines well above and beyond what the government requires.

These special rules are the investor overlays I mentioned earlier and include minimum requirements for credit score, income verification and even loan-to-value ratios.

The Government Wants to Stop Lender Overlays

The Federal Housing Finance Agency and the Federal Housing Administration have expressed concern that lender overlays are preventing homeowners from taking advantage of today’s low refinance rates. While there is no public policy regarding overlays HARP 3.0 is rumored to include lender indemnification to reduce risk and eliminate these investor overlays.

You can’t really blame lenders for enforcing their own rules. Penalties on a single bad FHA home loan can be in excess of a million dollars and with the current system all of the risk falls squarely on the lenders’ shoulders. If the government offers banks and lenders indemnification it would limit or completely eliminate risk for the most recent lender making overlays unnecessary.

How to Get Your Government Refinance Approved

Program overlays vary from one lender to the next so if you’re denied the best thing to do is shop around. Smaller community based or military credit unions like Navy Federal Credit Union or USAA are an excellent starting point when seeking approval rather than mega banks like Wells Fargo or Bank of America. This is true of any government refinance program from the FHA, VA or USDA. If first you’re not approved, just keep applying.

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Rebuilding American Homeownership: Yet Another Government Refinance Program

Another government refinance program has been proposed in Washington by Senator Jeff Merkley. The Rebuilding American Homeownership (RAH) program is for underwater homeowners who do not have their home loans with Fannie Mae or Freddie Mac. This new government refinance program is for responsible homeowners that make their payments on time and cannot receive help under the Home Affordable Refinance Program (HARP 2.0).

Help for Non-Government Backed Underwater Homeowners

If you’re underwater in your existing mortgage and are not backed by Fannie Mae or Freddie Mac this is the program for you. Rumors of HARP 3.0 removing the Fannie/Freddie requirement have yet to happen and this is the first program that could meet the needs of those left out of the HARP 2.0 refinancing party. This is rumored to include those underwater with jumbo mortgage loans. The government estimates there are three million underwater homeowners that have mortgages not backed by Fannie Mae or Freddie Mac.

Proposed Rebuilding American Homeownership Government Refinance Program

The program would create a temporary government backed trust to purchase mortgages from banks and private lenders not backed by Fannie Mae or Freddie Mac. The trust would raise money by selling mortgage backed securities and bonds to investors ensuring ongoing capital for purchasing home loans. The program proposes a 2% spread on refinance rates allowing RAH to operate without taxpayer funding. (2% seems like a lot)

The program is proposed as a short-term measure that would close down after three years when all of the loans were sold. The only requirement would be that you are current on your mortgage payments and not with Fannie Mae or Freddie Mac. The program doesn’t seem to address loan-to-value ratios over 140% because lenders must take a loss on the mortgage, which is not likely to happen.

The Rebuilding American Homeownership program would require mortgage insurance until your balance was paid down to an 80% loan-to-value ratio. Short-sales of homes in the program would not be allowed for four years.

RAH Mortgage Refinance Loans

The program proposes three choices for underwater homeowners. There is a 30-year fixed rate mortgage at 5 percent interest, a 15-year fixed rate mortgage at 4 percent interest and a combo mortgage. The 15-year fixed rate is a better deal but would offer higher payments including mortgage insurance. If you’re able to refinance under RAH you’d be paying higher refinance rates due to the 2 percent markup, which should still be lower than what you’re currently paying.

The third option includes a second mortgage loan for the loan-to-value balance over 95%. This second mortgage would not accrue interest or require payments for the first five years of the loan. This would act as a temporary mortgage reduction with minimal losses for lenders.

Will RAH Underwater Mortgage Refinancing Work?

Usually when a program sounds too good to be true in Washington, it never happens as advertised. Rebuilding American Homeownership seems to benefit underwater homeowners while limiting risk for lenders. A program like this is worthwhile as there are an estimated 3 million homeowners left out of latest version of the Home Affordable Refinance Program (HARP 2.0). It’s unclear how many of these homeowners have given up and walked away from their mortgage loans.

As with any proposed legislation it still has to make it through the House and Senate before being signed into law by the President. Stay tuned for more on the government’s efforts to bail out underwater homeowners.

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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.

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You can learn more about avoiding lender junk fees and unnecessary discount points when refinancing your mortgage with today’s low refinance rates by checking out my free Underground Mortgage Videos.

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