How many of your clients seeking to refinance will qualify for HARP 2.0?
- 10% or less (81%, 59 Votes)
- 25% (14%, 10 Votes)
- 50% (3%, 2 Votes)
- 75% or more (3%, 2 Votes)
Total Voters: 73
The revised Home Affordable Refinance Program (HARP 2.0) is up and running, as Fannie Mae and Freddie Mac (Frannie) have updated their automated systems to coordinate with HARP 2.0 guidelines.
To qualify for HARP 2.0, the homeowner refinancing on a first loan must:
- have an income;
- be current on payments;
- have a loan that was purchased by Frannie before June 1, 2009;
- have a loan (fixed or adjustable) with a loan-to-value (LTV) ratio of 80% or higher;
- have a loan with an LTV of 105% or less if the loan has an adjustable interest rate (ARM); and
- not have previously refinanced under HARP.
But that’s not all. In order to qualify, homeowners are evaluated by additional requirements depending on which agency (Fannie or Freddie) owns the loan and which bank services it. These additional requirements may include minimum credit scores and certain maximum debt-to-income (DTI) ratios, depending on the servicer.
The timeline for closing on a HARP 2.0 loan varies based on the servicer, ranging from 30 to 180 days to close.
HARP 2.0’s most notable update is the removal of the maximum LTV ceiling. Under the previous version, 125% was the maximum, meaning critically underwater homeowners with an LTV greater than 125% did not qualify, seriously neutering the program’s relevance in California. However, even though the revised program does not have an LTV limit, banks who service the loans may (and do) impose limits of their own.
For example, Wells Fargo will only allow refinancing if the LTV is 105% or less, if it does not service the existing loan. Many banks will not refinance under HARP 2.0 at all if they do not service the existing loan.
first tuesday take: The revisions to HARP were made to loosen its eligibility requirements, aiming to allow more homeowners to qualify. Frannie estimates two million borrowers will be able to refinance under HARP 2.0 nationwide (only one million refinanced under the first version of HARP).
However, the biggest change (removal of the 125% ceiling) will be no change at all if the banks maintain their own requirements. Even if HARP 2.0 was the best loan modification program in the world, it means nothing if the lenders are allowed to maintain control. Similar to the Home Affordable Modification Program (HAMP), strict qualification requirements set by the lender leave no help for those in the greatest need.
In order to help borrowers make the most of this program, agents must educate themselves about HARP 2.0, and be prepared to ask questions of the lender if they should represent a borrower seeking to refinance under the program.
Some questions the agent can prepare to protect the borrower’s interests include:
- How many points will the lender charge for the refinance?
- Will the lender be paid upfront or is their fee included in the total new loan amount?
- How flexible are the loan terms – amortization schedule, fixed rates?
- Are customized loan terms possible, so that borrowers can keep the same amortization schedule of the prior loan (which defeats the intent of the programs to increase consumer spending)?
- Are prepayment penalties re-established?
- Will the first loan’s private mortgage insurance (PMI) transfer to the refinanced loan at the same premium?
Borrowers seeking to refinance are often on the brink of a desperate situation – the point where agents are needed most to protect them from the possibility of predatory lending or self-defeating financial decisions. Some banks will only refinance loans they already service. Despite this, always encourage borrowers to shop around for the best loan that meets their refinancing needs.
Re: “Harp 2 mortgage-refinance program” from the San Francisco Chronicle