HARP Program News: Version 2.5 Anyone?

It’s been years since the HARP program was first introduced and millions of underwater homeowners with privately held mortgages are still waiting for HARP 3. If you’re paying on an underwater mortgage held by a private lender like Bank of America or Wells Fargo instead of Fannie Mae or Freddie Mac, the news out of Washington these days has been less than encouraging. Here’s the latest HARP program news you need to know regarding your underwater mortgage loan.

HARP Program Update

HARP 3 is long overdue and has been rumored to remove the Fannie Mae, Freddie Mac requirement opening the door to refinancing privately-held mortgage loans for millions of financially responsible Americans. That’s what President Obama promised in his State of the Union Address right…help for financially responsible underwater American homeowner?

The HARP program has only been open to Fannie Mae or Freddie Mac mortgages leaving millions of Americans with privately-held home loans out in the cold. These are the same privately-held (including subprime) home loans largely responsible for the mortgage crisis.

New HARP bills come and die in Congress every year; however, the Fannie Mae and Freddie Mac requirement remains largely because investors have a stake in these mortgage loans and stand to lose a ton of cash by helping homeowners who are struggling to make their payments.

Obama Refinance Program Changes

President Obama hasn’t stopped fighting for a HARP program that’s open to everyone that needs help. HARP 3 isn’t gaining much traction in Washington but there is hope. One of the potential changes the President is looking to make is to push forward the HARP eligibility date.

While HARP 3 is part of the White House agenda, overcoming investor concerns raised by removing the Fannie Mae, Freddie Mac requirement remains a difficult issue. Removing this requirement is said to require more than the President’s executive order and would have to make its way through Congress before reaching the President’s desk to become law.

Unfortunately mortgage help for underwater homeowners is not a hot topic in Congress right now with the focus squarely on domestic terrorism rather than the housing crisis which “ended” several years ago.

Still, if HARP 3 doesn’t get approval there are other changes in the works to expand the HARP program worth noting. These changes have been dubbed HARP 2.5 by many professionals in the business.

HARP Program Eligibility Date

Under HARP 2 the cutoff date to be eligible for the Home Affordable Refinance Program is May 31st of 2009. This means that Fannie Mae or Freddie Mac must have purchased your mortgage loan before that date to be eligible. June 1st of 2009 or later is simply a day late and a dollar short until HARP 3 arrives.

If you don’t qualify for the HARP program and are underwater your only other option is a cash-in refinance. This means you’re bringing sufficient cash to the closing table to pay down your mortgage balance to a favorable loan-to-value ratio. The problem here is if you had that much cash lying around you probably wouldn’t be underwater in your home loan in the first place, so your HARP program eligibility wouldn’t be an issue.

This is little consolation for most privately-held underwater homeowners who have to wait for HARP 3 to arrive.

There is a shimmer of good news in that the proposed HARP program extension would push that cut-off date out to 2010. This only helps people with Fannie Mae or Freddie Mac backed mortgages that missed the May 31st, 2009 cutoff. (Still a significant number of responsible homeowners left out of the HARP party…)

This proposal is nothing new; it was part of bills sponsored by Robert Menendez and Barbara boxer in the Senate…also known as the place where good bills go to die. The most recent bit of legislation proposed by the duo is called the “Responsible Homeowner Refinancing Act of 2013.”

Whether or not the 2013 version of the bill will make it to President Obama’s desk is anyone’s guess at this point. The Responsible Homeowners Act of 2012 never did and died a quiet death in Congress.

What About Re-HARPing?

Another possibility is the option for people who took advantage of the HARP program the first years it came out to re-HARP. Mortgage refinance rates are quite a bit lower than they were several years ago making re-HARPing a beneficial feature for many homeowners.

The problem with proposed changes to the HARP program is that as more time passes there is less urgency for Congress or the President to take action. Part of the mentality is that if these underwater homeowners were going to default on their mortgages they would have done so already so why change a program that’s “clearly” working?

The upside of the housing recovery is that many areas of the country homes are beginning to appreciate, meaning fewer homeowners are underwater and in need of HARP 3.

If your home appreciates and you’re no longer underwater the chances are good that you’ll qualify for traditional mortgage refinancing and won’t need a government refinance program like HARP 3. (Assuming your credit is sufficient to quality for today’s refinance rates)

In the meantime stay tuned to RefiAdvisor for more HARP program updates.

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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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No Appraisal Refinance Programs Can Get You Approved

Does my refinance require an appraisal? If you’re looking for no appraisal refinance programs because you’re concerned that your home has lost value or you’re already underwater there is good news. Government refinance programs like HARP 2.0 offer the no appraisal refinance mortgage you’re looking for. Here’s what you need to know about getting your low equity or underwater mortgage refinanced without overpaying.

No Appraisal Refinance Programs

Whether or not you’ll qualify for no appraisal refinance programs depends on several factors including your loan-to-value ratio, credit score, and if Fannie Mae or Freddie Mac backs your home loan. If you’re wanting cash out refinancing the chances of getting approved without an appraisal are slim to none.

For rate and term refinance your approval for today’s best refinance rates depends on whether or not you’re underwater. If your loan to value ratio is greater than 80% or you owe more than your home is worth your options may be limited to the Home Affordable Refinance Program.

Does My HARP Refinance Require an Appraisal?

In most cases your HARP 2.0 refinance does not require an appraisal. It is possible that you’ll find a lender asking for one thanks to program overlays, special rules enforced by individual lenders to limit their risk. If you’re applying for HARP and are asked to pay for an appraisal simply move on to the next lender.

The problem with HARP 2.0 is that your home has to be backed by Fannie Mae or Freddie Mac and they must have guaranteed it prior to June 1st, 2009. This requirement has left millions of underwater homeowners unable to qualify; however, rumors of HARP 3.0 changing are said to eliminate this requirement.

No Appraisal Refinance Programs With The FHA

If you’re with the FHA you can streamline refinance without paying for an appraisal because the FHA doesn’t allow cash out refinancing. This lets you to take advantage of today’s low refinance rates without verifying your income or employment.

If you’ve had an appraisal since purchasing your home the FHA will use it, if not they will simply use the purchase price of your home. As with any government refinance program you must be current on your mortgage payments and have no more than one late payment in the last 12 months. Late payments are anything considered 30+ days late.

The only catch with an FHA streamline refinance is that you must demonstrate some tangible benefit from refinancing. Lowering your payments or converting from an Adjustable Rate Mortgage to a fixed interest rate satisfy this requirement. If you’re lowering your payment it must result in a 5% reduction in your principal and interest payment including annual mortgage insurance premiums.

No Appraisal Refinance for Veterans

If you already have a VA mortgage loan the Veteran’s Administration offers an Interest Rate Reduction Refinance Loan (IRRRL). The VA home loan is currently the best deal in mortgage loans and this VA streamline refinance does not require that you pay for an appraisal.

The VA streamline refinance also allows you to roll your closing costs into the new mortgage or accepting higher refinance rates for a no-fee home loan. As with any government refinance program you cannot receive cash back at closing.

USDA Streamline No Appraisal Refinance Programs

The USDA refinance program Streamlined Refinancing for Rural America also does not require a new appraisal to qualify. As long as your payments are current and you have no more than one late payment during the past 12 months you can be approved.

The catch for the USDA streamline refinance is that your new refinance rates must be at least one percent lower than your existing interest rate and you cannot receive cash back at closing.

As you can see your no appraisal refinance options are limited to government refinance programs. If you’re underwater in your home and cannot qualify for HARP your options unfortunately at this time are limited to cash-in refinancing which will require you to pay for an appraisal.

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I Want To Refinance But My Home Didn’t Appraise For What I Paid. What Should I Do?

Have you been sidelined from today’s low refinance rates because your home appraisal is too low? Being underwater in your mortgage is not a good feeling, especially when you could be paying hundreds less after refinancing. Here are several options for underwater homeowners to help you get right-side up in that underwater mortgage loan.

Your Home Appraisal & Ability To Refinance

What is a mortgage refinance home appraisal? When prospective lenders order an appraisal for your refinancing application they are looking for the a monetary value to your home, considered its fair market value if you were to sell.

The appraisal helps lenders determine if you overpaid for your home based on the value of comparable homes in your area. If you overpaid for your home when you purchased or because the local market took a nose-dive, the risk for lenders refinancing your home skyrockets.

Mortgage lenders are all about managing their risk when lending and your home’s appraisal is one factor used in determining your eligibility for refinance rates.

There are several kinds of home appraisals ranging from electronic to a walk through performed by a licensed home appraiser. Fully electronic appraisals rely on a sales comparison approach. The computer looks at the sales of homes in your area with similar characteristics.

These characteristics include physical aspects like the number of bedrooms, bathrooms, how old your home is and the square footage. The quality of your neighborhood matters as similar homes with different schools may be more desirable than yours. If the lender is relying on an electronic appraisal it’s easy to see how you’re not getting credit for things like finishing your basement or your home’s curbside appeal.

What Happens When My Home Appraises For Less Than I Paid?

When you apply for mortgage refinancing the lender uses your home’s appraised value to determine your loan-to-value ratio. (LTV) This ratio along with your credit score is used when quoting refinance rates.

If you have an unfavorable loan to value ratio, higher than 80%, you might find the refinance rates you’re being quoted are higher than what lenders are advertising. If you’re underwater, meaning your LTV is greater than 100% you’ll find lenders will simply deny your application.

Refinancing Options For Underwater Homeowners

If you have an unfavorable Loan-to-Value ratio there are options including government refinance programs. If your home loan is backed by Fannie Mae or Freddie Mac and they got ahold of it prior to June 1st, 2009 you could be approved for refinancing under the Home Affordable Refinance Program.

If your mortgage is privately held by someone like Wells Fargo your options are limited to cash-in refinancing. This means you’re bringing sufficient cash to the closing table to buy your Loan-to-Value down to 80%. For many underwater homeowners this is simply not feasible due to the amount of cash it would take.

If you fall into this category of underwater homeowner your options are limited until HARP 3.0 arrives. Rumors of changes to the Home Affordable Refinance Program eliminate the Fannie Mae and Freddie Mac requirement essentially allowing anyone with an underwater mortgage to streamline refinance.

HARP 3.0 proposals come and go in Congress but nothing has made its way to the President’s desk. The Home Affordable Refinance Program is set to expire at the end of this year. If Congress fails to act I fully expect the President to extend HARP by executive order. Unfortunately until HARP 3.0 materializes the government is leaving millions of underwater homeowners in the cold.

How To Pay Less For Mortgage Refinancing

The most common mortgage mistake made by underwater homeowners is shopping for an approval. If you’re desperate to refinance and jump at the first approval you get without paying attention to fees you’re sure to overpay.

The Good Faith Estimate makes it easy to compare refinance rates and fees by focusing on page two. Make sure the quotes you’re getting are all for the same mortgage program and ask your loan officer for zero discount point quotes. If you’d like to see how paying discount points affects your payments there is a comparison table on page three.

Requesting zero point quotes from the same mortgage program is the only way to make an apples to apples comparison of refinance rates and fees from different lenders.

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Encouraging HARP 3.0 News

The Home Affordable Refinance Program failed to reach millions of underwater homeowners needing lower mortgage payments. HARP 2.0 is set to expire at the end of 2013 but the good news is that there are new talks in Washington about extending and expanding the program. Here’s the latest HARP 3.0 news to help you take advantage of today’s low refinance rates with your underwater mortgage.

Home Affordable Refinance Program Extension Eminent

Extending and expanding the Home Affordable Refinance Program (HARP 3.0) was a topic of discussion at a recent conference of the American Securitization Forum. Michael Stegman of the U.S. Treasury told conferences goers that President Obama is working to include privately held, non-Fannie Mae or Freddie Mac home loans in the government refinance program.

Privately held mortgage loans, meaning someone like Wells Fargo or Bank of America holds the mortgage instead of Fannie Mae or Freddie Mac, are the reason that millions of underwater homeowners cannot qualify under HARP 2.0. Government statistics indicate that these mortgages are responsible for nearly 2/3rd of mortgage delinquencies, a growing problem for the entire housing market.

President Obama is working with Congressional leaders on a bill but the President doesn’t necessarily need their approval to move forward as the Treasury Department already has the authority to modify many of these privately held mortgage loans, compensating investors for their losses in the process.

New HARP 3.0 Changes Promised

California Senator Barbara Boxer and Robert Mendez of New Jersey are promising (again) to sponsor new legislation in the coming weeks with similar goals for protecting lenders from losses and allowing homeowners previously left in the cold to qualify.

Along with that bit of seemingly positive news, New Jersey Senator Robert Menendez and California Senator Barbara Boxer plan to introduce new legislation this week aimed at protecting lenders from losses on refinancing privately-held underwater mortgage loans. The proposed changes would also extend HARP 3.0 for another twelve months.

There are several encouraging points to this Home Affordable Refinance Program legislation of interest to those not eligible for HARP 2.0:

  • Incentives to Increase Lender Participation
  • Allow For Non Fannie Mae and Freddie Mac Mortgage Loans
  • Eliminate The Cutoff Date of May 31st, 2009
  • Extend HARP 3.0 by Another Year

This is the kind of encouraging HARP 3.0 news underwater homeowners have been waiting for and would benefit the government by reducing delinquencies and foreclosures.

The new bill is the latest in a long list of proposed legislation, the most recent fell by the wayside as part of the fiscal cliff negotiations. Last year also saw the proposed Rebuilding American Homeownership stall and ultimately fail in Congress.

Will This HARP 3.0 Proposal be Different?

If there’s one constant in Washington it’s that Democrats and Republicans can’t agree to disagree. The longer they delay updating HARP 3.0 the more underwater mortgage holders walk away from their homes. The more Congress bickers over changes to the Home Affordable Refinance Program the less chance a bill has of reaching President Obama’s desk.

If you’d like to get involved and help HARP 3.0 become a reality sign the petition on the White House’s website.

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