Monday, October 24, 2011

HARP Changes - What We Know, What We Don't

It is likely that President Obama will be announcing some major changes to the Home Affordable Refinance Program (HARP) on Monday, October 24th, 2011.  The Federal Housing Finance Agency, the agency that regulates Fannie Mae and Freddie Mac as well as the 12 Federal Home Loan Banks throughout the country, has issued a press release outlining some of the important changes to the HARP program.

What We Know:

  • The goal is to prevent additional foreclosures by allowing additional underwater homeowners to refinance their mortgages at today's low interest rates and/or shortening the term of their mortgage.
  • Most importantly, the current 125% Loan to Value limit (LTV Ceiling) will be removed, but there is still a MINIMUM LTV of 80%.  Borrowers that are underwater by any amount greater than 80% may be able to participate in HARP.
  • Borrowers fees to participate in HARP will be reduced.
  • To participate, borrowers must be current, have not been late on a payment in the last 12 months, and have a verifiable source of income.  Actual affordability ratio (how much income needed) has not been released.
  • The new guidelines should waive the need for a full appraisal if a reliable Automated Valuation Model (AVM) is available on the property.
  • Participation in HARP is a one-time opportunity.  If a homeowner has refinanced under the original HARP guidelines, they will NOT be able to refinance a second time under these new changes.
  • Only mortgages that are owned by the Government Sponsored Enterprises (GSE's), -- Fannie Mae and Freddie Mac -- will be participating in the new program.  The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.  To determine if your loan is owned by Fannie or Freddie, you can use the following links:

What We Don't Know
This blog post was written on Monday 10/24/2011... and many of the details may change over time.  Please call a non-profit housing counselor for additional details about these HARP changes... or any other question you may have about your mortgage.

  • When will homeowners actually be able to refinance their Freddie Mac- or Fannie Mae-backed mortgage?  Guidelines on the new program will be sent to lenders and servicers by November 15th.  After that, the lenders/servicers will have to convert those guidelines into actual policies and procedures.  This means that it may be mid-December or even early 2012 before a homeowner can actually participate.  In addition, the concept of the program is complicated by the fact that certain servicers DO NOT ORIGINATE loans and may not have the capacity to originate the new HARP loan - without extensive (and time-consuming) changes to their internal systems.  PLUS, as we've seen with the original HARP program, there may be inconsistencies from one servicer to another.
  • What will happen to homeowners in the following circumstances:
    • Multiple mortgages - second lien holders will have to agree to 're-subordinate' their loan to the newly refinanced loan.  While there is no risk to the junior lien holders... we don't know which, if any, second lien holders will agree re-subordinate their mortgages.
    • Private Mortgage Insurance Holders - PMI holders have agreed to make the transfer of insurance from one loan to another easier... the details are still being worked out. 
Once again... as the guidelines to servicers and lenders will not be available until November 15th... it will take several additional weeks for the lenders and servicers to convert those guidelines into policies and procedures, meaning that it may a couple of months before homeowners can access this new phase of HARP.

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