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Mortgage Insurance and HARP refinance

Helping Hand
HIGHLIGHTS
  • You can do a HARP loan if you have Mortgage Insurance.
  • This is true for both PMI types: LPMI (Lender) and BPMI (Borrower).
  • Find links to the MI companies sites and service departments.

A HARP 2.0 Loan is Possible With Mortgage Insurance

There has been much talk about the availability of refinancing underwater houses through the HARP 2.0 program, for borrowers with MI (Mortgage Insurance), either BPMI (Borrower’s Private Mortgage Insurance or often referred to just as PMI) or LPMI (Lender Private Mortgage Insurance).

March 2012 will be another key date in the HARP 2.0 program, when participating lenders will be able to offer HARP loans through their automated underwriting systems.

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

Both Freddie Mac’s LP Relief Refinance Mortgage and Fannie Mae’s DU Refi Plus loans will be offered by all participating lenders. That means, if you qualify for the HARP 2.0 program, you do not have to go to your original lender to be approved on the manual system. It also means that if you have PMI or LPMI, you can start to shop around for another lender.

HARP Eligibility

The HARP 2.0 program made some basic changes in the program to allow more borrowers to refinance mortgage loans with underwater property. All HARP loans have to have a settlement date with Freddie Mac or Fannie Mae on or before May 31, 2009. Here are the six main points, as relates to the automated underwriting systems:
  1. Mortgage Payment History: no late payments within the last 6 months and no more than 1 late for 30 days in the most recent 7-12 months.
  2. LTV: No maximum LTV for fixed rate mortgage with term up to 30 years. For loans up to 40 years, or Adjustable Rate Mortgages that are eligible for the program, there is a maximum of 105%.
  3. Debt-to-Income (DTI) ratio: There is a maximum, generally 45%, according to the underwriting standards set by Fannie Mae and Freddie Mac.
  4. Occupancy: No original occupancy requirements.
  5. Type of Property: In general, any owner-occupied home, rental, or investment property is eligible. The program is available for condominiums and cooperatives, although there are certain restrictions.
  6. FICO: No minimum FICO score, unless payment increases by more than 20%, in which case the minimum FICO score is 620.

This is by no means an exhaustive list. There are many time very technical questions regarding eligibility that relate to Fannie Mae or Freddie Mac procedures, and must be clarified with the lender. For more information, see the excellent Bills.com article about the HARP mortgages program.

HARP and PMI:

Since the beginning of the HARP program in 2009, the government encouraged the refinance of loans that had MI. However, there is much evidence that MI was a problem in the HARP process. Fannie Mae and Freddie Mac have made it clear regarding their eased requirements for MI.

Fannie Mae, in their FAQs, specifically related to MI, in the following manner:

Provide a solution for borrowers with LTVs above 80% who currently may not be able to refinance because of mortgage insurance (MI) coverage requirements:

Fannie Mae’s basic requirement is that the same coverage that was on the existing loan be carried over to the new loan. They do qualify their statement, which means that there will be odd cases that must be covered differently. They also state that the MI companies are supportive of the programs for loans that they already insure.

Four MI Requirements for HARP 2.0

It is up to the lenders to offer the best package possible, although there is not much flexibility. When looking to refinance your loan through the HARP program, you will need to find a lender that works with Fannie Mae or Freddie Mac and your mortgage insurance company. Remember, after March 2012 you can work with new lenders.

Some of the mortgage insurance companies have run into financial trouble, and are not issuing new insurance policies. However, even these companies (such as Triad, PMI, and RMIC) are permitted to modify existing policies according to the HARP guidelines.

In general, the MI companies have made clear directives to refinancing HARP loans. Here are four main points:

1. Representations

The MI companies will not require more representations than does the GSE’s, Fannie Mae and Freddie Mac. If your lender approved your HARP loan, through the DU Refi Plus Loan or the LP Relief Refinance Mortgage, then it does not have to provide new or different information to the Mortgage Insurance Company.

2. Products

The MI companies will allow you to switch between BPMI and LPMI. This has been a problem for many, as lenders have refused to do a HARP loan, because there was LPMI on the loan. With the new program, they can offer this option, but you should check carefully if the added interest is justified.

3. Pricing and Coverage Percentage

In general, the GSE’s have agreed to accept the same coverage percentage. In general, the rates will be based on those in the original loan. There may be minor adjustments, if there is a change in the sum of the loan.

4. Technicalities

The mortgage insurance industry, like the mortgage industry, has many rules and guidelines. These should be worked out between the lender and the MI company. Anytime you do not understand a ruling, make sure that your lender provides a clear answer.

Working with the Lender and the MI Company

In general it is up to the lender to put together the best loan package will include the interest rate, mortgage fees (origination and discount points), represent all third party fees, and Mortgage Insurance. However, when doing a HARP loan, your lender will need to work with your current Mortgage Insurer. The details of the insurer should be available through the automated underwriting system. If not, the lender should contact Fannie Mae or Freddie Mac.

You, the borrower, should also be aware of the MI company that handled your BMPI. The mortgage insurance company is required to provide you information at the time of the origination of the loan, as well as an annual statement, which will remind you of your right to cancel.

Here is a list of the major mortgage insurance companies and a link to pages that deal with HARP:

Mortgage Insurance Co. Contact Number Company Web Resources
MGIC (800) 424-6442 MGIC HARP FAQ
MGIC’s Refi-to-Mod (RTM) Programs
Radian (877) 723-4261 Radian HARP Eligible Modification Program
Genworth (800) 444-5664 Genworth November 2011 update
PMI (800) 366-1143 PMI New Servicer page

Conclusion: A HARP Loan is Possible with Mortgage Insurance

Underwriting guidelines, by nature, are complicated. This is true for the mortgage underwriting guidelines set out by Fannie Mae and Freddie Mac. This is also true for mortgage insurance underwriting guidelines.

The good news is that the MI companies have simplified the process, relying on the lenders to verify that the borrower is eligible for a HARP refinance loan. The new HARP 2.0 program will be rolled out in its automated version by Mid-March 2012. This means that you, the borrower, will be able to switch from one lender to another. There are no barriers, from the mortgage insurance companies’ side to refinancing with LPMI, either from the same lender or a new lender. Both types of private mortgage insurance are eligible, BPMI and LPMI.

Bills.com will continue to keep you informed of the changes made in the HARP 2.0 program on the HARP mortgage page.

Comments (14)


Brad R.
Frederick, MD  |  May 22, 2012
This is not completely accurate, there are certain companies that provide LPMI that are not set up to transfer the LPMI from the old loan to the new refianced HARP 2.0 loan. I found out my LPMI is through General Electric Mortgage Corporation, and they are not set up to transfer from current loan to new loan. I've met with an attorney to see if this LPMI is a violation of the HomeOwners protection Act of 1998, as I was never notified of this LPMI or code word " Credit Enhancement" being placed on my loan.
Bills.com
May 22, 2012
Brad, thank you for your comment about mortgage insurance and the HARP 2.0 program.

I am not sure who your current lender is and which company holds your current LPMI, as I was not able to find information about GEMC. Do you have contact information for them?

However, I would like to clarify a few points:
  1. Fannie Mae and Freddie Mac allows and encourages lenders and mortgage insurance companies to participate in the HARP program. However, participation is voluntary. Some mortgage companies, such as GMAC, do not allow for a HARP refinance if you current loan has LPMI. (A GMAC official informed me, erroneously so, that the HARP program does not allow a loan with LPMI to be refinanced in the HARP program. That is a decision made by the company).
  2. You can, if your mortgage insurance company participates, transfer a LPMI loan from your current lender to a new lender. Obviously, you have to be eligible for a new lender automated HARP loan.
  3. There are some instances whereby the original lender had to provide additional credit enhancements, including mortgage insurance, to Fannie Mae which disqualify the loan from a HARP mortgage. These are exceptions to the general rule that LPMI is transferable to a new HARP loan and to a new lender

I do not believe that the Home Owners Protection Act of 1998 requires a lender to refinance, however there are disclosure issues. The lender should have notified you about the LPMI at the time it was taken out, as well as the time the reaches the 78% LTV level based on the original loan. If you do see a lawyer, please keep us informed regarding your progress.

Akoya P.
April 23, 2012
In early March I went to my mortgage company (Chase) to refinance my home to take advantage of the lower rates. My current home is underwater, lowest credit score was 765, loan is owned by Freddie Mac, and no late payments of any kind. I was all current with everything. But, I was still denied for the HARP 2.0 program. What the Loan Rep. told me was that it had to do something with my single premium payment to cover my PMI when the loan was originally written up. Are there other programs that may help?
Bills.com
April 24, 2012
Single premium payment is not a reason for disqualification from the HARP program. (It means that you paid all your PMI upfront instead of in monthly installments). I suggest that you shop around and contact other lenders. In addition, contact your mortgage insurance company to verify the type of mortgage insurance you have and if it is transferable to a new HARP loan.
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Song L.
Orange, CA  |  April 24, 2012
I had tried more than 15 lenders so far, but still no luck. Every lenders used the same Fannie Mae DU Refi Plus to qualify into HARP 2.0, and was denial for the same reason. No one willing to do manual underwriting, too risky, I even tried my loan origination underwriter, Home Loan Center. Seterus, my current servicer, the worst of them all, in my opinion, has no record or document that my loan has LPMI. I don't know if there is any option out there, unless Fannie Mae remove Credit Enhancement from my loan. It will become a major headache when more people try to get into HARP 2.0 and get denial for such condition. I am currently stuck with 6.95% rate. Any suggestions will be appreciated.
Song L.
Orange, CA  |  April 04, 2012
I have a Fannie Mae loan and servicing by Seterus. I am looking to refi into HARP 2.0. But I was denial by Fannie Mae DU Plus Refi, because of what they called Credit Enhancement included in my loan. I don't know this would prevent me from getting refi, even though my loan is owned by Fannie Mae. I know my loan has LPMI, but Seterus does not have any record that it does. I am stuck with high rate and no where to go. I would like to know if there is such thing as Credit Enhancement that prevent DU Plus Refi to accept my loan. Thanks.
Lori R.
Clawson, MI  |  March 17, 2012
I have two loans. No PMI-one was a piggy back loan and then switched to a 15 year standard. If If roll these both together and refinance 1. will the home be rated at the value it is now 106,000.00 or 170,000.000 that it was. 2. will I have to get PMI mortgage insurance? I do not have it now. Won't that add a lot of cost to my monthly payment? I am underwater. I owe 129,000. and the house is worth 106,000.
Bills.com
March 18, 2012
The HARP program does not allow you to consolidate a second loan with your first mortgage loan. If your first mortgage loan does not have PMI, then you will not be required to have PMI in the HARP program. The value of the house for the purpose of LTV is determined by today's market. If you meet the general eligibility requirements, as presented on the page above, then I recommend that you speak with a lender to verify if your loan qualifies for the HARP program.
James D.
March 15, 2012
I have attempted to re-fi in early March with both Wells Fargo and Quicken loans as we meet all requirements. Both turned us down for now, saying we do not qualify due to fact we pay PMI. Both said they are waiting for Fannie Mae to clarify its position on PMI. What is the real truth? Can private lenders legally decline a re-fi loan even as we meet all other requirements? We need to re-fi very soon. Need answers!! Thanks
Bills.com
March 16, 2012
Fannie Mae has made it clear that PMI is not a reason for being disqualified for the HARP program. Fannie Mae is not a lender, but sets guidelines for loans it purchases. (or Freddie Mac) guidelines, Since HARP loans are already owned by Fannie Mae (or Freddie Mac) lenders are required to follow guidelines set by those agencies. However, lenders are allowed to have stricter rules than Fannie Mae and can decline an application that does meet their own guidelines. I recommend that you speak with your PMI company and see if they have a recommendation. For more information read the Bills.com article mortgage insurance and HARP mortgage .
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Mike W.
Huntley, IL  |  March 16, 2012
HARP 2.0 will roll out March 19th! Lenders won't be able to correctly address new 2.0 loans until then. If you have mortgage insurance now they might have restrictions on which M.I. companies they'll deal with. I have a client with RMIC and Fifth Third Bank won't do it. They will deal with Radian, MGIC and Genworth only. So be sure to disclose which M.I. company you have now for quote accuracy.
Anthony H.
Largo, MD  |  March 02, 2012
I've called in to BOA in order to refi with the Harp 2.0 program but they say I'm still ineligible due to a "lender restriction", most likely the BPMI that I have on my account. Freddie Mac owns the loan. If the rules have changed, why am I still ineligible Thanks
Bills.com
March 02, 2012
The GSE underwriting rules have not changed, to the best of our knowledge, to deny a refinance under HARP 2.0 if a loan has BPMI or LPMI.

Are you certain Bank of America's reason to deny your loan was BPMI? As we explain above, there are two PMI types: Lender-Paid Mortgage Insurance (LPMI) and Borrower-Paid Mortgage Insurance (BPMI). As the comments from fellow readers attest, Bank of America uses a loan's LPMI as an excuse to deny refinancing under HARP 2.0. We would be interested to learn if Bank of America also uses BPMI as an excuse to deny a HARP 2.0 refinance.

As we mention elsewhere on this page, mortgage insurance on an existing loan is not a valid reason to deny a HARP 2.0 refinance. However, Bank of America is using LPMI as an excuse to deny loans. I advise readers denied a HARP 2.0 refinance by Bank of America to shop elsewhere when automated underwriting comes online in mid-March.
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Mike W.
Huntley, IL  |  March 16, 2012
All lenders have overlays. Some more than others. Fannie and Freddie set the guidelines. Lenders can add restrictions or additional requirements if they want to. Wells Fargo is not doing M.I. transfers at all!
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