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HARP 2.0 Mortgage Refinance Loan Program Tips

Use a HARP refinance for your underwater home

HARP 2.0 Mortgage Program Allows Homeowners to Refinance to Current Low Interest Rates.

March 19 Editor’s Note: The Fannie Mae DU Refi Plus and Freddie Mac LP Relief Refinance automated loan approval systems came online, which expands the choices eligible homeowners have when shopping for a HARP 2.0 refinance. HARP guidelines continue to evolve, and some lenders are stricter on credit scores and some are restricting LTVs. Your best solution is to shop around. Bookmark this page and check back regularly, as Bills.com will continue to update this page as HARP evolves.

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The Home Affordable Refinance Program (HARP) allows owners of underwater homes to refinance to today’s low interest rates. Refinancing is typically not possible for owners with little or negative equity. The key requirement for HARP eligibility is that the home loans must be owned by Fannie Mae or Freddie Mac.

The Federal Housing Finance Agency (FHFA) and Administration’s hopes for HARP is it will both stabilize the housing market and boost the overall economy by putting extra dollars in the pockets of consumers who are likely to spend them. The FHFA is conservator of Fannie Mae and Freddie Mac, and is the chief regulator of Fannie, Freddie, and the 14 housing-related GSEs and Federal Home Loan Banks.

Mortgage experts are optimistic about the new HARP. “Although there is still a good deal of uncertainty surrounding the specifics of how the expanded HARP program will be implemented at the individual lender level, the November 15 announcements from Fannie and Freddie do provide a source of encouragement for the equity challenged segment of the market,” said Peter Citera, vice president at Chicago Bancorp and mortgage education director at the Real Estate Institute.

Approximately 4 million Fannie and Freddie borrowers owe more on their mortgage than their homes are worth. Across the US, nearly 11 million are underwater, or about 22.5% of all outstanding loans, according to CoreLogic, a data provider to mortgage underwriters. About 2.4 million hold less than 5% equity in their homes.

HARP At a Glance

HARP has changed over time. In October 2011, the Obama Administration announced comprehensive rules for the new HARP, which people in the industry called “HARP 2.0.” In November, the Federal Housing Finance Agency (FHFA) expanded HARP and announced updated guidelines, which are discussed below. On March 19, the start of the automated loan approval systems expanded homeowner's choices in lenders.

HARP allows homeowners facing difficulties refinancing their mortgage through conventional methods to apply for a refinance of their mortgage. A homeowner that is current with their monthly payments but unable to refinance due to a drop in the value is the typical prime candidate for the HARP program. The ultimate goal is to allow a homeowner to do a mortgage refinance for a lower interest rate and overall monthly payment. Here are the general eligibility guidelines for HARP:

  • There is no loan-to-value cap in the new HARP, for fixed-rate loans. This is the most significant change of HARP 2.0. Under previous versions of HARP, the LTV could not exceed 125%.
    March 2012 Update: Perhaps the biggest news in the November 2011 announcement by Fannie Mae and Freddie Mac was that HARP 2.0 would allow for unlimited LTV loans. This went into effect in December 2011 for loans processed by the original lender through the manual underwriting systems. With the opening of the automated systems in March 19th the expectation was that lenders would apply these standards to all new HARP loan applications. The big surprise, and disappointment for many, is that some of the lenders have issued stricter guidelines that limit the LTV to the previous HARP 1.0 125% level or lower. Two examples are Quicken Loans and New Penn.
  • The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac (see Fannie or Freddie loan? table below).
  • At the time you apply, you are current on your mortgage payments. You can have one 30-day late payment in the past 12 months, but none within the past six months.
  • You have a reasonable ability to pay the new mortgage payments. Editor’s note: Fannie Mae removed the "reasonable ability to pay" clause.
  • The refinance improves the long-term affordability or stability of your loan.

HARP Changes for Lenders & Effects on Borrowers

The following is a summary of key changes found in HARP 2.0. Some key underwriting details are not yet announced, and are expected to be released before March 2012.

Limited Liability

What’s new: A key provision of the new HARP is that it limits lenders’ liability in cases of loan default. Essentially, Fannie and Freddie will not force the lender to buy back a non-performing loan.

Effect on you: This change should greatly expand HARP’s reach. Lenders will be much more eager to offer HARP loans, where they were previously reluctant. With more lenders participating, you will have an easier time getting a HARP mortgage.

Lender Fees Dropped

What’s new: Fees that Fannie and Freddie charge lenders for high LTV loans are being cut.

Effect on you: The reduced fees are passed on to you, making your loan cheaper. If you are financing to a 15-year or 20-year loan, the fees are cut even further.

Income Requirements Relaxed

What’s new: As long as your new HARP monthly payment is not more than 20% greater than your current payment, specific credit and income guidelines do not apply. The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined).

Effect on you: A high DTI is not enough to automatically disqualify a borrower. Also, if your family is now a one-income family when it was a two-income family on the original loan, you only have to show proof of one income, as opposed to conventional loans where all borrowers listed on the application must document income.

December 2011 Update: HARP 2.0 debt-to-income requirements have changed. According to a Fannie Mae announcement on December 20th, lenders will not longer have to demonstrate that the borrowers have a “reasonable ability to pay, unless the loan payment increases by 20% or more.” This applies only to loans borrowers do with their current lenders through the manually underwritten Refi Plus system. Loan applications that go through the automated DU system must meet the basic DU 45% maximum debt-to-income requirement.

Credit Score Requirements Relaxed

What’s new: The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined).

Effect on you: A low credit score is not enough to automatically disqualify a borrower.

March 2012 Update: “It is important for borrowers to be aware that individual lenders are implementing their own underwriting overlays,” said Craig Repmann, managing partner, Heritage Mortgage Banking Corp. “For example Fannie and Freddie do not have a FICO score requirement to qualify for a HARP mortgage, but most lenders are requiring a minimum FICO score. It is going to be difficult for borrowers with a FICO score below 620 to qualify for HARP 2.0. There are some lenders out there doing HARP 2.0 with FICO scores below 620, but it will take some effort to locate these lenders.”

Underwriting Requirements Relaxed

What’s new No. 1: Mortgage Payment History: A HARP lender can approve a loan that has one late mortgage payment in past 12 months, as long as it did not take place in the last six months.

Effect on you: You won’t be counted out for a mortgage late, when that could normally eliminate your ability to get refinanced at the lowest rates available. If you have a recent mortgage late, you can still apply for HARP, once you meet the relaxed mortgage late requirements.

What’s new No. 2: Relaxed Foreclosure & Bankruptcy rules: Your HARP loan could be approved, regardless of how recently a borrower filed bankruptcy or experienced a foreclosure.

Effect on you: Normally, if you filed for bankruptcy or experienced a foreclosure you would have to wait years before you could successfully refinance.

Occupancy Requirements Relaxed

What’s new: Owner Occupancy: HARP loans are no longer restricted only to owner-occupants.

Effect on you: You can now use HARP to refinance your second home or investment property.

Lenders Must Show a Borrower Benefits

What’s new: Lenders must show that the HARP mortgage borrower derives one or more of the following four benefits in the new loan:

  1. Reduce the size of the monthly payment
  2. Change to a more stable loan product, such as moving from an adjustable-rate mortgage to a fixed-rate mortgage
  3. Reduce the interest rate
  4. Reduce the loan amortization term (moving to a shorter-term loan)
Relaxed Condominium Requirements

What’s new: HARP eligibility used to require that no more than 10% of units in the complex be owned by one person and that no more than 20% of owners in the complex be behind on their HOA dues. These requirements are now removed.

Effect on you: More condo owners will now qualify for HARP. If you own a condo, your qualifying for the HARP program is no longer dependent on your neighbors’ finances.

“Condominium owners have perhaps the best reason to be optimistic; lenders are being relieved of the responsibility (for HARP refinance loans only) to ensure that condo projects meet the often strict project approval requirements of Fannie Mae and Freddie Mac,” Citera said. “Borrowers living in condominium projects that have seen a sharp increase in the number of renters, or those that have experienced some level of budgetary stress, will be much more likely to find relief under HARP 2.0 than they have under existing programs (as long as their loans are owned by Fannie or Freddie).”

Recourse, Non-recourse, and Anti-deficiency

Bills.com believes the bulk of HARP mortgages will occur after March, 2012 when Fannie and Freddie update their automated loan underwriting/approval software. Before then lenders could approve HARP mortgages by underwriting the loans manually. Loans underwritten manually expose the lender to greater risk because if a manually underwritten loan defaults, the lender is required to buy back the loan.

Before refinancing, borrowers should know whether their current loan is a recourse or non-recourse loan and also be familiar with their state’s anti-deficiency laws. Refinancing a non-recourse loan could expose the borrower to responsibility for a potentially huge financial obligation where no such obligation currently exists.

Basic HARP Requirements

Not every upside-down home qualifies for HARP 2.0. Here is a summary of the basic requirements:

  1. Loan must be owned or guaranteed by Fannie Mae or Freddie Mac
Fannie or Freddie loan?
Source: Fannie Mae & Freddie Mac.
Fannie Mae lookup Freddie Mac lookup
Fannie Mae or Freddie Mac must own your home loan for you to qualify for HARP.
  1. Loan was sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  2. Loan was not refinanced under HARP previously, unless it is a Fannie Mae loan that was refinanced under HARP from March through May, 2009.
  3. Loan’s current loan-to-value (LTV) is greater than 80%.

More About HARP 2.0

Many readers have asked Bills.com about mortgage insurance and how it may impact qualifying for HARP 2.0. Mortgage insurance on a loan does not block a refinance under HARP 2.0 automatically. See the Bills.com resource Mortgage Insurance and HARP Refinance to learn more.

Readers who do not have Fannie, Freddie, or other GSE loans are not eligible for HARP 2.0. In late January 2012, President Obama proposed a similar plan for non-GSE home loans. See Obama Refinance Plan for more information on this proposal.

More HARP updates will be released both by lenders and by Fannie and Freddie, so keep checking with Bills.com to stay updated on details of the new HARP program.

Comments (1434)


Stilian A.
Twp Of Freehold, NJ  |  May 25, 2012
I just closed my HARP 2 refinance loan with Chris Milker from CMG Financial. I ran into a lot of trouble with other brokers and lenders due to it being a condo, 130% LTV and LPMI. The servicer was Chase. They did not nothing with my loan! The CMG rates and closing costs were great. Good luck everyone!
Darren R.
Reno, NV  |  May 24, 2012
I am currently refinancing three mortgages through HARP 2. I tried Bank of America, who owns two of the loans that are rental properties, and the rates and costs were high (estimated 5% and $5,000 in closing costs each). I also tried Wells Fargo, who owns our primary residence, and while the rates and costs weren't as high as BofA (4.875% and $3,200 in closing costs), they still seemed higher than they should be. Neither seemed to care whether I tried elsewhere to refinance when talking to them. I then called a local credit union (based on information I received from someone on this site who read my frustration in dealing with BofA). Other than a rocky start in dealing with a new Mortgage Broker at the credit union, the paperwork was signed two weeks ago and should close in another 3 weeks. Here is a breakdown of the mortgages: Primary residence is at 4% (LTV ratio 120% and a current rate of 4.875%), Investment property 1 is 4.125% (LTV ratio is 145% and a current rate of 6%), and Investment property 2 is 4.25% (LTV ratio of 160% and a current rate of 6.625%). All loans are with no points, no appraisals, and closing costs estimated at approximately $2,400 for each. The primary residence has PMI but I was told by the credit union they have dealt with them successfully before. Mine and my co-borrowers credit scores are >800 and we owe very little debt other than the outstanding mortgages. Based on the refinancing, I should save about $950 a month for all 3 properties. My recommendation is to call local credit unions or smaller banks and see if they are refinancing through HARP 2, even if they don't own a loan. I believe you may find better rates, costs, and much better customer service.
Bills.com
May 25, 2012
Darren, thank you for your detailed comment. As your experience shows, shopping around produces the best results. We recommend that borrowers get a free HARP mortgage quote from lender that are part of the Bills.com lending network.
Sarah C.
Portland, OR  |  May 23, 2012
We signed yesterday on a HARP 2.0 refi with Umpqua Bank. Took approx. 45 days. No appraisal required. 4.375% 30 year fixed. Current loan was 30 year fixed at 6.25%. Will save us about $450/month. Cash to close was approx. $2,400, but nearly all was prepayment on escrow acct. Overall experience was very good.
Kristyn B.
Ladysmith, VA  |  May 23, 2012
My husband and I have a 30-year fixed, 6.247%, 22% down-payment, and a current LTV at 122% per the appraisal, but when we were appraised a while ago we were at 151%, which is why we had held out for HARP 2.0. We are unhappy with PHH, so we went with Wells Fargo. That was on 3/17/2012. As of today, 5/23/2012, the underwriters are STILL asking for paperwork, with no end in sight. It is to be 4.5%, but I am beginning to become a little disenchanted with HARP and the banking system, to put it mildly. I find it so frustrating that when the Fed bailed them out, they kept all the cash in their reserve funds...Perhaps the Fed should have just bailed the homeowners out instead.
Sherry G.
Dayt Bch Sh, FL  |  May 22, 2012
Success! Disbursing tomorrow on a 30 year at 4.5% and 1 point with Embrace Home Loans in RI... I am in FL but worked with Joe S. and he was in RI... I must say it was loads of paperwork but nothing unreasonable was requested. My appraisal brought me in at 128%. My original lender had an overlay so they couldn't do it so had to shop. I was at 6.75% so quite a savings. I am glad the process is finally almost done...
Melnaie H.
Royal Oak, MI  |  May 21, 2012
We've been told that the only thing holding us back from getting approved is because my current loan is a recourse loan. I refinanced in 2001. Anyone heard of this?
Bills.com
May 21, 2012
I have not heard of this before. It is not clear to me whether your current lender told you this or if you are hearing this from multiple sources. I suggest you continue shopping around.
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Melanie H.
Royal Oak, MI  |  May 21, 2012
I have heard the same thing from both my current lender (Chase) and Quicken. Even called Fannie Mae, was told the address was eligible by them. So I'm unsure if this is a lender decision or a Fannie Mae decision. I was told by both of the lenders that when put through the automated system, it comes back denied. Both lenders have told me that my credit score, debt to income, ltv, etc. falls in line with others that have gone through so they feel strongly it's due to the recourse loan issue.
Bills.com
May 21, 2012
What, if any, error code did Fannie Mae provide Chase and Quicken Loans? You mentioned Chase is your current lender. Ask Chase if it would consider submitting your application manually.
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Melanie H.
Royal Oak, MI  |  May 21, 2012
I'm so glad I found this site, and that you responded. It forced me to ask all the same questions again and I finally got the answer. The reason why this was is not going through with either of these lenders is because it would require manual underwriting. Which apparently, per Chase, "they don't have the time or resources to do manually underwritten HARP loans because of the popularity of the program" Yep...they finally fessed up instead of continuing to blame the program. So now my new question is this...do you know of any lenders that are doing manual underwritten loans for the HARP program? Chase has never held a warm place in my heart but lets face it, I'm stuck with them. To be told "they don't have time to manually underwrite my loan" after I've given them 13 profitable years is a tough statement to hear. As soon as I can get out from this loan I will do a happy dance just to have my ties to them cut! Any help on the manually underwritten lenders out there would be much appreciated!! Thanks so much!
Bills.com
May 21, 2012
According to HARP rules, only your current lender/servicer can manually underwrite your loan. Because no one else can do one, if Chase will not do it, you are stuck.

I suggest you try to work your way up the chain of command at Chase. It seems totally unreasonable to treat a current customer the way you're being treated. Perhaps someone in management would be able to allow an underwriter to manually process your application. Try calling the Chase at 800-228-4922.

Other than that, you can start complaining. See if Chase has a complaint department. Send a letter to their CEO. Contact the CFPB (Consumer Financial Protection Bureau), The White House, your congresspeople and senators.

HARP should be available to you. Chase should manually underwrite your loan. It could be possible that there is another reason that you're being turned away, but it should not be the case that Chase is not manually underwriting any loans at all.

It may be the case however, that the loan officer who "fessed up" was incorrect. I think it may be the recourse issue you mentioned that is the reason you're having problems. It is not about the lender having recourse against you, if you default This is about recourse that can be taken against Chase. It is a technical issue between Chase and the secondary market purchaser, Fannie Mae. There is not much that can be done about that issue, aside from Chase contacting Fannie Mae to see if there are any other options. It sounds, from your experience, that they are not willing to put any extra effort. Please keep us apprised of how things develop for you.
Ross D.
Henderson, NV  |  May 20, 2012
Wells Fargo informed us that the rate we were getting had a .25% hit because they required a 90-day rate lock. When I pressed for a reason (I didn't need it) they initially said it was because they were swamped with applications and couldn't close in time. I suggested that was their problem and not mine, so why should I pay a higher interest rate. I asked for a manager to call me to explain this...it took two weeks for her to call me back (and only after I rattled some cages) and when she did she said that the 90-day rate lock was a Federal requirement as part of the HARP rules. I personally find that hard to believe, but cannot find a way to disprove it. Can anyone here point me to something that supports or disproves this? I'm thinking of going to a lawyer but want to make sure I have a case first...
Bills.com
May 22, 2012
In general, lenders are not required to make a loan, nor promise you that they can deliver the loan in a certain period of time. However there are state laws and federal laws regulating changes lenders can make in the terms of the loan. This would include a lock-in agreement and a GFE.

It is impossible to guess what the loan officer meant by a federal requirement as part of the HARP program. The lender is not obligated to a specific rate lock period for a HARP loan, unless you have a written agreement with the lender.

If you have a contract with Wells Fargo, then consult with a lawyer, although weigh your costs and benefits. If you feel that you have been unfairly treated, you can choose to file a complaint with the CFPB. Finally, if you have the option of using a different lender (not restricted to a manually underwritten loan), then shop around.
Stephen D.
Nampa, ID  |  May 17, 2012
After being originally denied by the Freddie Mac LP system on March 17th for Harp2 when working with Waterstone mortgage, I decided to go with my original servicer Wells Fargo. On April 25, I was approved by Wells Fargo at 4.5% for a 30 year mortgage with $6,200 in closing costs and a closing date of May 8th. I decided to go back to Waterstone Mortgage to see if the Freddie Mac system would approve me because I heard Freddie Mac "Made Changes" to their LP underwriting system. I also no longer wanted to work with Wells Fargo. Apparently "too big too fail" also means "big refinance costs". I was approved by the Freddie Mac LP system on May 1 this time around. The wait was worth it, I was offered 4.5% for a 30 year fixed mortgage with $3,700 in closing costs with my 144% LTV, NO PMI, with a closing date of May 23 (3 weeks 2 days!) saving me $560 per month. The sad thing is that Waterstone could only work directly with Freddie Mac for a Harp 2 loan. Not one other bank that Waterstone (about 15 banks) worked with on Harp 1 would even give me an offer. Hence the 4.5% rate. The Harp 2 program I believe is a complete failure and will be going forward. The process is difficult. Very few who have went through the process can really say it was easy; I have seen your posts. The biggest problem is that banks are NOT following the rules of Harp 2 as was laid out by the President last October. Rules such as "ability to pay" was removed from Harp 2 but when you apply for Harp 2, every document that points toward your "ability to pay" is requested by the mortgage consultant. My home is now $45,000 underwater. I feel so good now, I think.
Rajan B.
Redmond, WA  |  May 17, 2012
I have three different quotes:
  1. 4.375% $1,628 P&I: No Cost
  2. 4.250% $1,613 P&I: Third party only around $1,800
  3. 4.000% $1,574 P&I: Origination + Settlement = $4,571

We may buy another home in future but keep this as a rental property. I am trying to understand which one is good? Please suggest? Thanks!

Bills.com
May 22, 2012
It is difficult to offer firm advice without knowing either the term of the loans offered or the balance due. Therefore, my observations will be general.

Regarding offer No. 1, it is unlikely this is a true, no-cost loan. Review the offer carefully. Did the lender increase your principal with this loan? Pick No. 1 if you plan to own the property for less than the life of the loan.

Regarding offer No. 2 and No. 3, the monthly payment difference between the two is so slight that the amount you save each month with No. 3 will take you about 9 years to recover due to the high closing costs. The key issue here is the actual cost of No. 1.
Michelle S.
Riverview, FL  |  May 17, 2012
Just wanted to share our story...we tried doing the HARP 2.0 refi with B of A (our original lender) back on March 15. They shut us down to the LPMI (which we never knew we had up til that point). We began calling many other services listed on Freddie Mac's list. Some would not work with us due to LPMI. A few would work with us only if our LTV was 125% or less. According to Zillow, we were a little under 125% LTV, so we began with Quicken. Shortly into dealing with them, it appears Freddie no longer wanted actual appraisal values; they only wanted the value from their LP system (their desktop appraisal which factor in all foreclosures). That made our LTV around 130% so Quicken would no longer work with us. Even though I read the negative comments by some on here, we contacted Aim Loan as that was one of the few options we had left. They agreed to work with us. It was a fairly, smooth easy process with them. It took about 6 weeks from start to finish due to their people being overwhelmed with refi's; however, we were able to refi with them. We just signed the closing papers yesterday. They never once asked us to resubmit docs, and as long as you have easy access to your W2s, bank statements, paystubs, etc. and a scanner, it was a very easy process. The only thing we ran into with the HARP program (and we reached the same problem with 3 different lenders) was their system would not seem to allow us to do a 30 year fixed; only a 20 year fixed. Most of the lenders weren't sure why, but all 3 got "rejected" from Freddie when trying our loan for a 30 year, but they all received okay when trying for a 20 year loan. Although, we would have preferred the 30 year loan for more monthly savings, the 20 year is probably better because we still save $200 a month, as well as gaining equity faster.
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