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FHFA Loosen HARP Qualifications to Include More Homeowners

Home values have fallen dramatically, leaving many homeowners seeking a way to refinance an underwater home and take advantage of today\'s low interset rates.
HIGHLIGHTS
  • Current home loan must be current and not late.
  • LTV ceiling lifted for fixed-rate loans.
  • 11 million home loans are underwater.

Fannie Mae & Freddie Mac Remove 125% LTV and Other Restrictions on HARP

Homeowners of underwater properties with loans backed by Fannie Mae and Freddie Mac may have been thrown a lifeline today.

The Federal Housing Finance Agency (FHFA) — the conservator of Fannie Mae and Freddie Mac and chief regulator of Fannie, Freddie, and the 14 housing-related GSEs and Federal Home Loan Banks — announced it would make a series of two major and three minor changes to the Home Affordable Refinance Program (HARP) to make more homeowners eligible to refinance their home loans.

HARP RefinanceWhen HARP was announced in early 2009, the Obama Administration said it expected the refinance program would help 5 million homeowners refinance their mortgages to lower rates. To date, less than 900,000 Fannie and Freddie homeowners have refinanced under HARP, which may seem like a large number. However, in that same time period, 9 million Fannie and Freddie homeowners have refinanced outside of the HARP program.

The two major changes to HARP that may make more homeowners eligible are:

  • Removing the 125% loan-to-value (LTV) limit on homeowners with Fannie or Freddie fixed-rate mortgages. "Loan-to-value" is a ratio comparing the balance of the loan in comparison to the market value of the property. According to homeowners in contact with Bills.com, the 125% LTV limit is a deal-breaker and impediment to refinancing.
  • Fannie and Freddie will no longer require loan originators to make certain guaranties about the loans they sell to Fannie and Freddie. For example, lenders will not be faulted for an inaccurate appraisal.

The revamped HARP is available to homeowners with loans sold to Fannie and Freddie before May 31, 2009 and an LTV of 80% or higher.  You can't take out a new HARP loan if you have refinanced before under HARP, unless your loan is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

Homeowners must be current on their home loan payments, and have no late payments in the last six months and no more than one late payment in the last 12 months. As mentioned, there is no LTV ceiling for fixed-rate loans. However, for variable-rate loans, the LTV ceiling is 105%.

HARP loans are restricted to homeowners whose current loans or deeds of trust are owned by Fannie Mae or Freddie Mac. You can determine if you have a Fannie Mae or Freddie Mac loan by going online (check Fannie; check Freddie) or by calling 800-7FANNIE or 800-FREDDIE (8 am to 8 pm ET).

Second mortgage holders agreed to subordinate their loans to the refinanced HARP loans, title companies cut the prices of HARP refinances, and insurers promise to transfer the old title insurance to the new loans, according to Shaun Donovan, HUD Secretary.

The other changes to HARP include:

  • Cutting fees for loans less than 30 years in length.
  • Eliminating a property appraisal in instances where an "automated valuation model (AVM)" is available. Using an AVM eliminates about $300 in loan costs.
  • Extending the HARP program life to December 31, 2013.

According to RealtyTrac, about 11 million borrowers owe more on their mortgages that their homes are worth.

President Obama touted HARP's changes in an address in Las Vegas. Nevada has the nation's highest per-household rate of foreclosure filings at one in 44 in the third quarter, followed by California at one in 88 and Arizona at one in 93, according to RealtyTrac.

"Probably the single greatest cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago," Obama said. "And as long as this goes on, our recovery can't take off as quickly as it would after a normal recession."

Finding Help From HARP

According to Fannie Mae and Freddie Mac, homeowners should contact their existing mortgage servicer — the company the homeowner sends their loan payment to — or another lender offering HARP refinances.

It is important to note that HARP is a refinance and not a mortgage modification program. Homeowners with more than 100% LTVs will not see their principal balances reduced under HARP. For that reason, FHFA officials are touting 15-year and 20-year terms as a means to accelerate the time to 100% LTV.

Comments (4)


Jeremy L.
Abingdon, MD  |  April 11, 2012
Do you have any information on how HARP 2.0 affects homeowners with LPMI? We were not aware that our mortgage carried mortgage insurance until our servicer, Bank of America, summarily denied out request for information about a HARP refinance because of LPMI. Are they using current information about the program? Where else can we get further information about HARP eligibility? The "making homeaffordable.gov" website simply states to contact your loan servicer for more information but Bank of America seems completely uninterested in helping us understand how to proceed. Is there somewhere to find the actual law that governs how HARP is supposed to work, and not just the interpretation used by a bank?
Bills.com
April 11, 2012
See the Bills.com article Mortgage Insurance and HARP Refinance to learn more about the issue you raised in your comment.
Avatar
Jeremy L.
Abingdon, MD  |  April 11, 2012
Thanks, I found the article you mentioned and HARP 2.0 Mortgage Refinance Loan Program helpful.

My understanding of the HARP program is now that the main incentive for lenders is the Limited Liability Fannie and Freddie are offering for HARP refinances. Since we have LPMI the lenders are already not liable and must maintain the same amount of insurance, so there isn't really any incentive for them to help us refinance. When a bank tells us "we don't qualify for HARP because of LPMI" what they mean is that they are not interested because there isn't really any benefit to them. Is that an accurate (if crude) summary of the situation? We MAY qualify under some other bank's guidelines, so we just need to shop around hoping to find a lender who does want to refinance us?

I also see that borrowers can switch between LPMI and BPMI during a HARP refinance. Do you have any advice on doing this? Are there reasons to do so? We did not have BPMI on our loan mostly because we were not aware that there was ANY mortgage insurance at all. Thanks!
Bills.com
April 11, 2012
LPMI is not a reason to for a new lender to avoid refinancing a HARP loan, except for the technical complications in taking out a new policy. (Your original lender can renew the existing policy).

If you are eligible for a HARP loan
Bills.com can help you find HARP loans. With rates at historic lows, it pays to apply now.
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