Archive for March, 2012

How Successful will HARP 2.0 Be?

I attended a class this week regarding the newly-revised HARP called “HARP 2.0.”

HARP stands for Home Affordable Refinancing Program. It is a government program intended to help homeowners who are upside-down to keep their homes by refinancing.

The original HARP was introduced in March 2009 and was a “failure” — very few homeowners were helped because the guidelines allowed only those who are 25 percent upside down or less to refinance. Most homeowners are upside down by more than 25 percent. Second, lenders were not required to participate, and most did not. Third, lenders who chose to participate were not required to follow the guidelines.

Prior to HARP 2.0, the government has launched many “unsuccessful” programs, such as:

– Home Affordable Modification Program (HAMP)

– Second Lien Modification Program (2MP)

– Home Affordable Unemployment Program (UP)

— Home Affordable Foreclosure Alternatives (HAFA)

Now that the presidential election is approaching, the Obama Administration has again come up with the new HARP 2.0 plan, modifying the original HARP. Here are some basics the program:

Summary of HARP 2.0 Changes

• Announced on October 24, 2011, by the Federal Housing Finance Agency

(FHFA).

• Expanded eligibility to additional borrowers, including borrowers who are

significantly “underwater.”

• Recent changes include the following:

– Program end date extended until December 31, 2013

– Relaxed borrower delinquency requirements

– Maximum loan-to-value ratio “cap” of 125% eliminated for fixed-rate loans with

terms up to 30 years.

– Lenders are relieved of certain representations and warranties.

– New appraisal is not required in some situations.

– Risk-based fees for certain loans have been eliminated or reduced.

Payment History Requirement

• The borrower must be current now and must have an acceptable payment history.

• HARP 1.0:

– No late payments in the past 12 months (if payment is increasing)

– No more than 1 late payment in the past 12 months (if payment is decreasing)

• New HARP 2.0 Requirements:

– Current on the existing mortgage, and

– No late payments in the past six months, and

– No more than one 30-day delinquency in the past 12 months.

If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP. You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following Web sites:

• For Freddie Mac: http://www.freddiemac.com/mymortgage or

• For Fannie Mae: http://www.fanniemae.com/loanlookup/.

VA, FHA loans are eligible for the new program.

HARP 2.0 refinancing need not be through your current lender or servicer. Homeowners can refinance with any lender.

How successful will HARP 2.0 be?

The above information presented by FHFA, a government agency of the current administration, sounds very promising. After all, it does make it sound like “EVERYBODY” is eligible, no matter how deeply underwater you are. It sounds exciting and optimistic. However, looking at the big picture may pose obstacles to its success.

1. Lenders are NOT required to participate in HARP 2.0. Smaller lenders may have difficulty in participating because their warehouse lines or funding sources restrict them from refinancing significantly underwater homes. The risk of taking on possible defaults is not worth taking. Small lenders believe they make more money out of purchase loans than refinance loans without equity.

2. Lenders who choose to participate are NOT required to follow the guidelines suggested by Fannie and Freddie Mac. Hence, appraisals may still be required, loan to value is lender-based, and lenders can create their own guidelines which could be significantly different and harder to qualify.

3. Big banks are more likely to consider HARP 2.0 to continue servicing their current and low-risk customers.

In summary, HARP 2.0 is a lender-based program, subject to lenders’ guidelines. In reality, if lenders make more money from HARP 2.0, they will be inclined to do it. It is intended to help some people but NOT everybody.

As for the designers of this program, the timing of it makes one wonder whether the current administration has the people’s interest at heart, or its own. If you are interested in finding out if you are qualified for HARP 2.0 or have any questions, please contact me at 480-650-0075.
*HARP 2.0 information provided by Ted Canto of Academy Mortgage.

Advertisements

March 22, 2012 at 3:04 pm Leave a comment


Categories

Feeds

Fresh Tweets