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How a HARP-Refinance Can Help You

Use a HARP refinance for your underwater home
HIGHLIGHTS
  • The new HARP refinance has NO cap on LTV.
  • New HARP lowers refinance costs.
  • Final guidelines on new HARP refinance will be released in November.

Underwater? New HARP Refinance Could Help You.

There is good news for homeowners who have been unable to refinance at today’s historically low rates. On October 25th, 2011, President Obama announced an expansion of the Homes Affordable Refinance Program (HARP). More than 1 million loans are expected to be refinanced through the new HARP, helping struggling homeowners, by reducing their mortgage payments or speeding up the time it takes to pay off their mortgage.

If you were turned down for a HARP refinance only because of a low appraisal, this is your second chance!

Easier to Qualify

The most important changes have made it easier for you to qualify to refinance.

  1. Loan to value (LTV): There is no longer a maximum LTV limit for borrower eligibility, if your new loan is a fixed-rate mortgage. That means no matter how far underwater you are, you can still refinance. If your new HARP loan is an adjustable rate mortgage, the maximum LTV is 105%.
  2. Appraisals: The appraisal process is being streamlined, cutting time off the process and eliminating a hurdle that has tripped up so many people who have been trying to refinance. Lenders will be able to use an AVM (automated valuation model) to estimate your property's value. In many cases, no new appraisal will be needed. Where there is not a reliable AVM value, a new appraisal will be required.
  3. Relaxed credit restrictions: You need to be current on your mortgage for the past six months, but can have one mortgage late in the past 12 and still qualify. There is talk that other small derogatory marks on your credit will not be a barrier to qualifying.
  4. Streamlined subordination: Major lenders have reportedly agreed to subordinate second mortgages automatically. This saves you the time, hassle, and cost of subordinating. You will also avoid the frustration of having your second mortgage holder's refusal to subordinate kill your refinance application.

Lower Costs

HARP loan fees and closing costs will be less than conventional loans, saving you money.

  • Fannie and Freddie are lowering their origination fees, which should be passed on to you.
  • Appraisals costs are eliminated or greatly reduced.
  • More lenders competing for your business. Because new HARP regulations lessen the risk for the lender, more lenders will participate in the program. The more competition there is for your business,the better deal you should be able to find.
  • Fees will drop further if you finance to a 20-year or 15-year loan.

Benefits of a Shorter Term Loan

The government is offering you an incentive to refinance to a shorter term loan. A shorter mortgage enables you to pay down the amount you owe much faster than if you have a traditional 30-year mortgage. Interest rates on shorter term mortgages are usually lower than on thirty-year mortgages. At today's low rates, and depending on your current rate, the lower interest rate may give you the opportunity to shorten the term of you mortgage without much change in your monthly payment, perhaps even shortening the term and reducing your payment, too.

Risks of a Shorter Term Loan

Your monthly payment in a shorter term loan is going to be higher than in a longer term loan. There is talk that the HARP income verification may be less strict than on a standard loan. The government wants you to take the shorter term loan, which is why it is offering incentives to choose one. If the lender is not being as strict verifying income, then it is your responsibility to make sure you can afford the payment, or you risk losing your home. Don't be lured by a lower interest rate on a shorter term loan into biting off more than you can chew.

Basic HARP Restrictions

HARP loans are restricted to homeowners whose current loans 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).

You are eligible for a HARP refinance if:

  • Your mortgage is owned or guaranteed by Freddie Mac or Fannie Mae.
  • Your mortgage was sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • You haven't refinanced before under HARP, unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • Your current loan-to-value (LTV) is greater than 80%.
  • You are current on your mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.  Don't panic if you are currently late on your mortgage. HARP will run through December, 2013, so you have time to catch up on your mortgage and qualify for a HARP loan.

Stay Tuned

The revised HARP program guidelines are supposed to be presented to lenders by November 15th, 2011. You may be able to submit an HARP loan application as soon as December. Make sure to keep checking back with Bills.com for updates and information, as the program gets ready to launch.

Comments (14)


Rose B.
February 04, 2012
Thanks for the HARP info.
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Rose B.
February 08, 2012
Hey Rick, You too? If you find a Bank that will work with you, please post your results...love to work with them! Thanks, Rose B.
Rose W.
Vancouver, WA  |  February 04, 2012
What about Homeowners who have PMI paid mortgage insurance. This insurance was imposed on us as unsuppecting homeowners, when we did our second re-fi. We had no idea it would prevent us from refinancing. We owe $185,000 and our Home is worth $140,000... We qualify for the LTV, clearly-- "e are underwater!" However with the claus of PMI paid by our Lender keeps us enslaved at a higher interest rate...the Lender benefits!!! Is there anyone out there with a similar problem as mine?
Bills.com
February 05, 2012
LPMI does not disqualify you for the HARP program. Anyone who responds to Rose, please let us know who is the Mortgage Insurance Company underwriting the LPMI.
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Ricky W.
Atlanta, GA  |  February 08, 2012
Pretty much in the same boat as Rose. So to answer your question about specific loan companies: I have a Wells Fargo loan with LPMI. According to them, the mortgage insurance company is Radian Guaranty. I've been told by Wells Fargo that the LPMI disqualifies me for the new "HARP 2.0" rules.
Bills.com
February 08, 2012
I do not know why Wells Fargo claims LPMI disqualifies you for the HARP program. According to the Radian Web site and its Dec. 1, 2011 bulletin, effective Dec. 15, 2011:
Radian will now issue a Certificate of Insurance Endorsement for Loan Modification on all Radian-insured loans refinanced under HARP. This includes both Same and New Servicer transactions.
To clarify the issue, I contacted Radian customer service at 877 RADIAN1 (723-4261), and asked about his issue. The Radian representative stated to me clearly that Radian will transfer an existing LPMI to a HARP loan, contingent upon the lender qualifying the borrower's eligibility for the HARP program.

My advice? Look for a new lender.
Avatar
Ricky W.
Atlanta, GA  |  February 08, 2012
Thanks for the response. The link for the Dec 1 bulletin from Radian did not work for me -- do you have an alternate link? I wasn't able to navigate to it on Radian's website either. I was able to reach someone in the President's Office at Wells Fargo who asked for that link so they could review it. It feels like I'm getting somewhere - thanks a lot for your help!
Bills.com
February 08, 2012
The link has been fixed. You can also reach Radian directly with the telephone number provided.
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Kerene C.
February 15, 2012
i am trying to get my loan refinanced under the new HARP guidelines with LPMI with bank of america but they are still telling me that i do not qualify because i have LPMI. They do mention that i meet all other qualifications. Do you have any links or suggestions i can send them so I can get pass this road block? It seems like this should not be an issue under the new quidlines but the loan officers are still saying no when they see the LPMI
Bills.com
February 15, 2012
Based on messages we received from other readers, Bank of America seems to have a blanket policy of kicking out HARP applications where the existing loan has LPMI. As we have mentioned to other readers, there is nothing in HARP 2.0 that disqualifies LPMI loans from HARP 2.0.

Your question is reasonable, "What should I do?" Wait until mid-March when the automated underwriting systems are online, and you can take your business to another participating HARP 2.0 mortgage servicer.
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Jose O.
Cornelius, OR  |  March 27, 2012
Ricky, Any update on your status? I'm in the same boat...waiting to hear from a lender that's ready to approve me, for this exact same situation. I currently have my loan through Wells Fargo with LPMI, the lender I'm working with doesn't do LPMI...But I'm praying that the folks at Radian (My current MI company, I think) work with the new lender's Loan Processor and work things out such that I can go from LPMI to BPMI. Pray for us.
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Ricky W.
Atlanta, GA  |  April 03, 2012
It's been a long couple of months, so here is my current status... It sounds like Wells Fargo has finally put in place all their software switches that allow them to process HARP/LPMI loans. I am in the initial stages of refinancing my 30 year loan down to a 15 year loan with a nice interest rate, with LPMI staying on. I had also contacted Quicken Loans, who are now refinancing Radian LPMI loans as well. They had a killer interest rate, but will only finance up to 125% LTV, so I'd have needed to bring a lot to the table. I contacted a few other lenders, but have not heard anything back. In the end, the total interest paid to Wells Fargo and to Quicken were within $1000 of each other (WF being the lower amount, actually), and were a quarter of what my current loan's total interest paid would have been. I'll post again once I'm done with the refi just to confirm that it's possible. Big thanks for all the help! The amount of money I'm saving over the life of the loan is astonishing.
Amy P.
Hingham, MA  |  November 14, 2011
Applying for HARP refinance, sticking point is my Fannie Mae mortgage is serviced by GMAC. Mortgage has lender private mortgage ins on loan. Will this prevent HARP refi under new rules? We were not aware of this til now. GMAC refuses to refinance under HARP.....
Bills.com
November 15, 2011
New HARP rules are to be released today, November 15th, 2011. My understanding is that PMI will not be a barrier to refinancing under HARP. Stay tuned for further details.
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