Jan09

Welcome H.A.R.P 2 – Underwater Properties

by Brad Snow on January 9th, 2012 at 10:10 am
Posted In: Lender To The OC

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Dec03

Harp2 (underwater properties)

by Brad Snow on December 3rd, 2011 at 1:00 pm
Posted In: Lender To The OC, Lender To The OC, Loan Program update

HARP 2 refinance (watch for updates)

The Obama administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

Making sense of the story

  • HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
  • Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won’t begin buying certain types of refinanced loans until March.
  • To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home’s market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.
  • The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home’s market value.
  • Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home’s value.
  • In most cases, borrowers won’t have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
  • Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.
  • If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
  • There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.
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