We’ll Take All the HARP We Can Get
There are two questions on everyone’s minds surrounding the new HARP or HARP Phase II:
1. Will it work this time?
2. Do I qualify???
To the first question, it’s widely known the original Home Affordable Refinance Program (HARP) rolled out in 2009 to help struggling homeowners refinance their home wasn’t a huge success. The Federal Housing Finance Agency (FHFA) estimates it helped 894,000 homeowners refinance in the almost three years since its inception.
However, the game changers for HARP Phase II are the elimination of the 125 percent LTV cap requirement in the original HARP and FHFA waiving some stringent requirements (a.k.a. warranties and representations) placed on the lenders and servicers to “buy-back” the refinanced loans should they go bad. Waiving those requirements paves the way for this program to actually help homeowners.
Currently, there are an estimated over 10 million homeowners underwater in the U.S. with over 2 million borrowers in CA alone (According to CoreLogic’s Negative Equity report for Q2-2011). This hidden force is weighing down the housing market during a time when relief is much needed for many struggling with job losses, pay cuts, or other factors hurting confidence in the marketplace. Economist Mark Zandi predicts the changes to HARP could potentially help 1.6 million homeowners refi their loans by the end of the program (by the way – it ends December 31, 2013).
So any help is helpful, right?
To the second question, I want to share some key requirements for the borrowers that would qualify under the new HARP plan announced Monday October 24, 2011:
1. The mortgage needs to be owned or guaranteed by Fannie or Freddie. (Sold to Fannie Mae or Freddie Mac on or before May 31, 2009). You can check to see if your loan is Fannie Mae or Freddie Mac.
2. (Considered by many to be the most important part of the plan) as mentioned above, the LTV is no longer capped at 125% LTV for fixed-rate mortgages (it is capped at 105% LTV for adjustable-rate mortgages). For HARP Phase II, the LTV only needs to be 80% or higher as HARP is intended for borrowers who do not qualify for the traditional refinancing model.
3. The mortgage cannot have been refinanced through HARP in the past.
4. The mortgage cannot have had a late payment in the last 6 months and no more than one late payment in the last 12 months. Further clarification – late is considered over 30 days by most lenders according to FHFA.
5. New appraisals are not required for HARP refis as long as there is a reliable AVM (automated valuation model) for estimating the value provided by Fannie or Freddie.
If the borrower qualifies for the new HARP plan and refinances, at current mortgage rates this could mean saving as much as a couple hundred dollars each month on their mortgage payment, which is always good. Just look at mortgage rates on the 30-year fixed rate mortgages at 4.1% for the last couple of weeks and 1-year ARMs at 2.9%.
C.A.R. applauds this new attempt to help struggling homeowners and has been a long-time proponent and supporter of removing the 125 percent LTV ceiling in the previous HARP. It’s great to see the Association Leadership’s efforts come to fruition here. Final details of the program to be released on November 15, 2011.
Here are some good reads on the subject. Happy refinancing people!
The HARP Phase II press release from FHFA
Home Lending Revamp Planned from the Wall Street Journal
Twelve Questions from Obama’s Refi Plan from the Wall Street Journal
Obama’s Mortgage Refinancing Effort: This Time It’s Different from the Atlantic
SOURCE: Sara Sutachan, Author, CAR Blog October 26, 2011, Filed under: Market Data
http://blog.car.org/2011/10/well-take-all-the-harp-we-can-get/#more-1930
