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Obama Passes HARP- HARP 3.0 Mortgage Refinance Next?

HARP 3.0 mortgage loan refinance as a lifebelt on water

Updated: Nov 14, 2014

Bills Bottom Line

Bills Bottom Line

Are you underwater and can’t refinance? Take another deep breath. Although there have been a number of proposals, no HARP 3 programs have been approved. Ideas have been offered to improve the HARP 2 program. Others call for a completely new HARP 3 mass-refinancing program that will help all borrowers, not just ones with Fannie Mae/Freddie Mac owned loans, originated before June 1, 2009. If you are underwater and want to save money by refinancing, then learn about the different HARP 3 possibilities.
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Obama Passes HARP 1.0 and HARP 2.0... and now HARP 3.0 Mortgage Refinance Programs?

January 2014 Update:  There is still no HARP 3; however, there is some speculation that the new director of the FHFA, Mr. Mel Watt, will more aggressively push for a HARP 3 program. Many of Watt's proposals are similar to ones proposed by President Obama in his #myrefi mass refinance program.

Are you underwater? Even with rising home prices, there are still millions of homeowners who can’t refinance. The HARP 2 program was announced in October 2011, and rolled out in March 2012. Since then, there have been many ideas floated, but no substantial HARP 3 program has been implemented.

The two main problems with the existing HARP refinance program are that:

  1. Borrowers that meet Fannie and Freddie guidelines are still unable to find a lender that will approve a HARP 2.0 loan.
  2. Loans not owned by Fannie Mae and Freddie Mac still do not qualify.

Will there be a HARP 3.0? If there is a HARP 3.0, what form will it take? In order to help you find a refinance loan that fits your need, learn more about:

  • Almost HARP 3 – Improving HARP 2
  • HARP 3.0: Getting a New Program
  • HARP 3.0 and You

HARP 2 Updates

Read the Bills.com HARP 2 mortgage page for the latest updates about HARP.

Almost HARP 3: Improving the HARP Mortgage

One simple idea is to make minor tweaks to the HARP program, making it available to more borrowers with Fannie Mae/Freddie Mac loans. This would not technically be a HARP 3 program, but an "almost HARP 3" program.

The HARP 2.0 program worked along these lines, making important changes in the existing HARP program to expand the number of eligible borrowers. In order to get more borrowers into the program, HARP 2.0:

  • Removed LTV restrictions
  • Eased qualifications for borrowers and types of property
  • Increased cooperation between the mortgage insurance companies and the lenders
  • Increased cooperation by second lenders to subordinate their mortgages

Problems with the HARP 2.0 program:

Stricter Lender Requirements: Even though many borrowers meet the general HARP requirements, lenders are not approving their loans. If approved, lenders offer high interest rates and fees. For example, even though the HARP 2.0 program eliminated the 125% LTV requirement, many lenders created their own stricter underwriting requirements. This includes offering loans only at lower LTV levels, requiring higher credit scores and lower DTI (debt-to-income) ratios than the HARP guidelines require, and limiting certain qualified types of properties.

Lack of competition: Up until March 19 2012, the HARP 2.0 program was open only to the original lenders (current servicers) through a manual underwriting process. The big lenders, who solicited their preferred borrowers, dominated the HARP mortgage loan market.  The March 19 rollout of the automated underwriting systems has increased competition, with many mid-size lenders entering the market. In addition, as attested by comments sent by Bills.com readers, the big lenders have dropped their interest rates. However, the playing field is not level, as Fannie Mae and Freddie Mac granted the manual loans with easier conditions and less warranties and representations, meaning less risk for the lender. This risk factor has driven some lenders into stricter lending requirements and higher interest rates.

Here are some "Almost HARP 3" Ideas

Menendez-Boxer proposed legislation: Senators Menendez (D-NJ) and Boxer (D-CA) have floated ideas for new legislation that would level the field by making the new lender’s risk the same as the original lender’s risk. They also propose eliminating some of the stricter requirements that exist in the automated system. So far, they have proposed their legislation three times with no success.

Shopping and Competition: Not all lenders offer the same rates. It is your job to shop around and look for the best deal. Look for a lender that will meet your situation with a competitive interest rate.

Are you eligible for HARP?

Bills.com can help you find HARP loans. With rates at historic lows, it pays to apply now.

HARP 3.0: Getting A New Program

Many borrowers do not have Fannie Mae- or Freddie Mac-owned or guaranteed loans. Underwater borrowers with loans owned by banks and private investors don’t have an alternative HARP program.

Before the mortgage meltdown, many borrowers who did not meet lenders’ strict underwriting guidelines took non-conventional loans, which were held by the banks or private investors. For example, there were many self-employed borrowers with good, but not always verifiable income, and borrowers whose loans did not meet the conforming loan limits. That means that responsible borrowers who are making their payments on time can’t refinance into a program that will lower their payments and make their mortgages more affordable.

Here are some of the HARP 3 Proposals:

Obama Mass refinance plan: January 2012 President Obama announced a plan to extend the HARP program to new loans not owned by Fannie Mae and Freddie Mac. The plan calls for the government, through the FHA, to guarantee the new refinance loan. Here are some of the main points:

  • Loans must meet the HARP eligibility requirements, but do not need to be held by Fannie Mae or Freddie Mac.
  • A streamline process including a minimum FICO score of 580, and no appraisal.
  • The FHA guarantees the new refinanced loans.
  • Impose a bank tax to finance the cost of the program.

Sen. Merkley’s Rebuilding American Homeownership Proposal: In July 2012, Sen. Merkley proposed a mass refinancing program for all underwater borrowers. His plan called for easy underwriting criteria, no fees, and a rate of 5% for a 30-year loan or 4% for a 15-year loan. (This was before mortgage rates increased in mid-2013). Sen. Merkley’s home state, Oregon, recently expanded their Rebuilding American Homeownership Assistance Pilot program to include a third county in Oregon.

Treasury "Market Rate Modification Proposal": In 2012, there were reports of expanding the HARP program to non-GSE - Fannie Mae and Freddie Mac - loans. One such proposal, the Treasury "Market Rate Modification Proposal" would allow an interest rate reduction to underwater borrowers who meet hardship eligibility requirements and are current on the loan. No progress has been made with this proposal.

HARP 3.0 Mortgage and You

HARP 3.0 - Will a new program happen? So far, there has been no progress to implementing a HARP 3 program. However, with the appointment of the new FHFA director, Mr. Mel Watt, there are expectations for a revision of the current HARP program and maybe even an extension to a full-blown HARP 3 program.

However, take into account two major changes in the housing and mortgage markets:

  1. Home prices increased in 2013. This has helped many borrowers climb out of their negative equity hole, making it possible for them to refinance under a normal mortgage program.
  2. Mortgage rates increased in 2013. As mortgage rates increase, you save less money by refinancing.

Bills Action PlaBills Action Plann:

Where does that leave you? If you are an underwater borrower, but can’t find a refinance plan then take these steps:

  1. Check who owns your loan.
  • If your loan is a Fannie Mae or Freddie Mac loan check out the HARP 2.0 mortgage plan. Find out the exact reasons for the denial. Sometimes it is lender’s overlays, or lack of ability to work with your mortgage insurance company. Even if one lender turns you down, keep shopping.
  • If your loan is a FHA or VA loan, then look into a streamline finance. It can be possible to refinance even if your LTV is over 100%.
  • If your loan is a non-conventional loan, then look for any updates on this page regarding the HARP 3.0 mortgage refinance.
  1. Keep making your payments. One of the requirements for a HARP loan is timely payments. Even though the program allows one late payment (30 days) in the second half of the 12 months, many lenders will not approve loans if there are any late payments during the entire year preceding the application.
  2. If you can’t make your payments, then look into a modification, including the HAMP program or a streamline modification.
  3. Bookmark this page and watch for updates on the HARP 3 program.
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84 Comments

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  • MO
    Feb, 2014
    MaryLou
    Great info. We've lived in our MN home 12 years. Due to retirement and myself needing to go on permanent disability, we have a "limited" fixed income. Our home was valued around $225,000 6 yrs ago. After retirement & reduced income we also assisted my daughter recover from drug addiction, sent for treatment and face DWI and attorney costs. That sent our bills over every limit imaginable, we filed bankruptcy in 2010 and finalized in Feb 2011. We are now struggling with an underwater FHA loan of $244,000, decreased home value at $155,000. Our FICO scores are around 650-660. We have done two modifications. Our payments are still $1,500/mo at 3.5%, 30 yrs. The payment is $1,200 +140 ins +160 taxes, and $97 PMI. Currently we are 4 months behind in payments. Any financial business place we have spoken with for refinance says the bankruptcy has to be OLDER, the lender, Citi, is attempting to make payments affordable; but there are no places they can reduce unless it would be the interest rate!? What we really need them to do is a "principal reduction"! We are still housing my daughter (until she gets on her feet). Is there ANY way to approach our lender or underwriters that could make them consider a principal reduction? It would make our payments extremely affordable? We do have our other debt under control by consolidating some and cutting back on nearly every expense possible. Is there a good approach for this or other means to refinance?
    0 Votes

    • BA
      Feb, 2014
      Bill
      Nothing ventured, nothing gained.

      You need to craft an argument showing it makes more sense financially for the investor in your mortgage to take a haircut than for you to strategically default.

      Step back and look at your situation dispassionately. Does it make sense for you to short sell your home, rent for a year or two, and then buy again when you're on your feet again?
      0 Votes

  • SM
    Jan, 2014
    saille
    thanks for the clearest explanation of the mortgage refinancing juggernaut that anyone has given me since we started trying to refinance our 5.875% interest only (for 10 years) $490,000 loan in 2009. same as many of the folks commenting, we have a non GSE loan and are getting nothing but denials and run around despite good credit, long track record (we are 68 and 76 y/o),no late/missed payments, etc etc. and despite equity in the home. We thought that applying for a "modification" might move the mountain and help the monthly struggle to pay, but when we applied to our loan originator Morgan Stanley, they promptly sold our loan to Ocwen in 2012 (tho Ocwen says they only "service" and that the loan is owned by a "private lender" who "does not do modifications". they won't say who the owner is). are they required to tell us who the owner is? does the june 2009 deadline now apply to us? I feel the frustration of all those who see the big entities get bailed out by us taxpayers and yet congress is doing nothing to require these banks extend help to the millions of us who fall outside of govt backed loans or other arbitrary requirements. banks are reporting record profits, so now is a good time to make banks extend help to those of us who have given them profit by continuing our goodfaith payments on overpriced loans.
    0 Votes

    • BA
      Jan, 2014
      Bill
      I don't believe that a loan servicer is required to disclose the owner of the loan. The June 2009 deadline does not apply to you, because you have a non-GSE loan.

      What is not clear to me is why you can't refinance into a conventional loan. I understand that you are making your payments on time, but do you have enough income to meet a lender's DTI requirements? Try speaking with other lenders and, if you are turned down, be sure to find out the specific reason.
      0 Votes

    • MP
      May, 2014
      Michele
      I used to work for a real estate attorney and we ran into questions of who owns the Note on a regular basis. One way to find out who owns your "Note" is to write a Qualified Written Request (QWR) and address it to the specific address the servicer wants you to send it to. Look on Ocwen's website (www.ocwencustomers.com), and once you log in to your account, look under "Contact Us" and there should be addresses for certain purposes. There will be an address to send QWR's to.

      Send the QWR Certified Mail, return receipt and also fax the QWR. Keep confirmation that this has been received and follow-up with a phone call in 2 days to get verbal verification of receipt. You should also send this to your original lender (Citi) and go through the same process to get their QWR address.

      This is not to be considered legal advice, so it is best to seek legal counsel on your particular situation. Most good attorneys will give you a 30 minute consultation to determine if your situation would benefit from legal representation and your options. An attorney will be able to write a very effective QWR for you, or you can research it on the internet, but I would definitely seek legal counsel to go over your options first. Spending the money to have an attorney write the QWR will be well-spent. There should be a State Bar for your state to call for a referral for a real estate mitigation attorney.

      The lender is required to respond to the QWR, so your letter should demand this specific information.
      0 Votes

  • JA
    Jan, 2014
    Jen
    Will Harp 3 address the homeowners who have a second mortgage on their upside down properties? I did an 80/20 split when I purchased the home in 2007 and my second mortgage has an incredibly high interest rate that I can not get rid of because of the LTV.
    0 Votes

    • BA
      Jan, 2014
      Bill
      Unfortunately, none of the HARP 3 proposals I have seen cover your situation, specifically.
      0 Votes

    • JB
      Apr, 2014
      Jon
      I don't see why HARP wouldn't work with an 80/20. If those were backed by Fannie or Freddie, wouldn't they be covered now? If not, and 3.0 gets approved to cover non Fannie or Freddie backed loans, why would 80/20 loans not be eligible? I too have an 80/20 loan and I owe probably 50K more than my home's value between the 2. I was told the only reason I don't qualify for HARP is because my loan(s) are not backed by Fannie or Freddie. Next year my 80 goes from interest only to interest AND principal. My 80% loan rate is 6.75 and my 20% is 7.9. My credit score is over 820. It is crazy to me that I am not allowed to refi and that banks tell me to miss payments so I can get an adjustment. I was naive and uninformed when I bought my home, and talked out of using a VA loan. Now that I am more responsible, I want to get myself in a better situation.
      0 Votes

    • BA
      Apr, 2014
      Bill
      Second mortgages are not HARP eligible. If a person had a first mortgage that was Fannie/Freddie backed, then it would be possible to do a HARP, if the second mortgage holder agreed to subordinate its loan.

      I understand your desire to improve your loans, given the high rates compared to today's market and the fact that your payment will increase significantly once the interest only period ends. Unfortunately, unless there is a HARP 3, there won't be a good option for you. Even with the HARP 3 proposals I have seen, your second would likely still need to subordinate.

      I agree that choosing to go late in the hope of getting a loan modification is very risky. Late payments, for one, would very likely disqualify you from a HARP 3. It will harm your credit rating, too.
      0 Votes

  • JO
    Oct, 2013
    Jason
    Thank you for the information! It is a bit scary Congress has such a big role in moving this forward due to their inability to get anything done in a timely manner. We own two homes and, like most, underwater on both even with one of our original loans being a traditional type with a reasonable rate, the market in our area just got hit too hard. Our main house, however, has a investment group holding the note who refuses to consider refinancing and are not included in HARP 2.0 -- Even if HARP 3.0 is the fast track of including more company's/groups outside of Fannie at least that is some movement forward and maybe Congress can manage that one. They then could take a bit of time to look at a 3.5 HARP process that is reinvented from the ground up, taking the time to evaluate the first versions and improve on the model.
    0 Votes

  • WQ
    Sep, 2013
    William
    I'm on the same boat. Let's hope they pass it.
    2 Votes