Some borrowers who planed to refinance their mortgages under the Home Affordable Refinance Program (HARP 2.0) program might not be able to take advantage of the benefits of taking on a low interest rate loan because of a provision contained in their original mortgage documents.
Homeowners with mortgages insured by United Guaranty Corp. might have their mortgage application denied because United Guaranty did not agree to the new streamlined procedures, which required mortgage insures to waive certain clause in the original mortgage paperwork.
Usually, mortgage lenders must repurchase loans with faulty underwriting, or loans in need of additional documentation. If United Guaranty refuses change its position, as many as 15% of borrowers with underwater mortgages, and otherwise eligible to participate in HARP 2.O, may miss the chance to move into low interest rate loans.
United Guaranty sent out a press release expressing its support for the HARP program. According to the statement, the company believes its decision will affect only a small “minority” of the mortgages it insures.
HARP 2.0 Rolls Out in a Few Weeks
The new and improved version of the Home Affordable Refinance Program (HARP) should enter full operation by April 2012. Originally introduced in April 2009, the HARP program has the mission of helping homeowners who have underwater mortgages gain financial relief by refinancing form high interest rate mortgages to low– interest rate mortgages.
With an average decline in home prices of more than 30 percent, since the housing market peaked in 2006, many homeowners have properties that appraise at less than what they owe on their mortgages.
Many of these homeowners were already financially struggling have had problems sleeping loan modifications under normal circumstances. Now, homeowners, who hold mortgages with Fannie Mae or Freddie Mac, will be able to reapply, and hopefully many of them will receive new mortgages under the reduced underwriting criteria.
The new program eliminates most appraisals. It also got rid of the cap on the loan –to-value ratio, which excluded many homeowners from participating in the first HARP program. Now, no matter the amount homeowners owe on their mortgages, compared to the value of their homes, they can still qualify to refinance their properties at low interest rates.
By reducing or eliminating the fees they charge on mortgages, Fannie and Freddie rid the program of a major obstacle to borrowers refinancing their mortgages.
Home Borrowers Can Qualify for Refinance
Fannie and Freddie should have the required automation technology in place. In the meantime, borrowers should call their mortgage lenders to obtain information about the lender’s application process for mortgage refinancing. Borrowers should also ask when they could start submitting loan applications.
All borrowers must meet the following criteria to qualify for the revised home refinance program:
- Loans insured or owned by Fannie Mae or Freddie Mac (GSEs)
- The GSEs purchased or securitized the mortgages by May 31, 2009
- Homes with a loan-to-value ratio above 80%
- Homeowners current on their mortgages
- Borrowers cannot have a late payment during the last six months, prior to submitting an application.
- Homeowner cannot have more than one late payment within the last year.
A borrower can go to the Fannie Mae or Freddie Mac websites to find out what agency own mortgage on their home, if applicable. Borrowers should gather all the necessary paperwork now, and submit the application once their lender opens the process.
Homeowners with mortgage owned or insured by the Veterans Administration or Federal Housing Agency (FHA) or Department of Agriculture do not quality for the Home Affordable Refinance Program.
Borrowers with mortgages owned or guaranteed by these programs should contact the agency that administers their particular mortgage program. The Obama administration has given a directive to all federal agencies with homeownership programs to work with homeowners having financial difficulties.