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HARP 2 details emerge

By Holden Lewis · Bankrate.com
Wednesday, November 16, 2011
Posted: 10 am ET

For underwater homeowners who want to refinance their mortgages, the details of HARP 2 are coming into focus.

HARP 2 is a liberalized revision of the Home Affordable Refinance Program. (See Bankrate's HARP page.) HARP's goal was to allow homeowners to refinance their loans, even if they owed more than their homes were currently worth. Millions of homeowners are in this predicament because their homes lost value in the bursting of the housing bubble.

HARP was introduced in 2009, and it was designed to help homeowners with mortgages owned by Fannie Mae or Freddie Mac. The program let borrowers refinance at up to 125 percent of their homes' current values. For example, under HARP, if you owed $125,000 on a house that was now worth $100,000, you could qualify for a HARP refi, because your loan was 125 percent of the home's value. But if you owed more than 125 percent of the home's value, you were out of luck.

That 125 percent loan-to-value limit has been eliminated under HARP 2. Under new rules issued on Tuesday, there is no loan-to-value limit on HARP refis -- at least, for borrowers who have fixed-rate mortgages.

The elimination of the loan-to-value limit is the biggest change under HARP 2. Here is a rundown of HARP 2's guidelines:

  • The program is for borrowers whose mortgages are owned by Fannie Mae or Freddie Mac, and who got their loans before May 2009.
  • HARP had been scheduled to expire at the end June 2012; HARP 2 extends the expiration to the end of 2013.
  • There is no loan-to-value cap anymore for borrowers who now have fixed-rate mortgages.
  • For borrowers with ARMs, the loan-to-value cap remains 105 percent.
  • Borrowers can qualify for HARP 2 refis if they have paid on time for the last six months and have no more than one 30-day late payment in the last 12 months. Originally, HARP didn't allow any delinquencies in the last 12 months.
  • Fees have been reduced. Lenders are fond of adding fees to loans that have an added smidgen of risk. Fannie and Freddie call these fees "loan level price adjustments," and the charges easily can climb to 2 percent of the loan amount on HARP refis. Under HARP 2, the fees are reduced to zero percent on loans for 20 years or fewer, and 0.75 percent for mortgages for more than 20 years and for ARMs.

Generally speaking, the changes go into effect  Dec. 1.

Regulators and analysts expect HARP 2 to result in 1 million more refis than would have closed under HARP, with an average loan balance of $150,000 to $175,000.

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23 Comments
GaryL
December 28, 2011 at 4:56 pm

HARP 2.0 doesn't go into effect until March now so my bank, (US Bank), won’t even give me details on it, you can read everything here except the rate info. Because when they first ran my house a month ago and it was 123% LTV they said I could qualify for the current HARP program. Looking at a 4.65% rate on a 30 year fixed and it does save me $$ per month but I was hoping for a more prime rate, (never been late, income good, and 800 credit scores). I was told that the higher the LTV the higher the rate, kind of like a bump because of the negative equity. This is the part that makes no sense to me, if Fannie and Freddie are bumping rates then the definition of HARP starts to deteriorate. I could wait until March, prove over 125% LTV, (currently believe to be almost 150% LTV), but if everything holds true then my rate may go up.

Bottom line is I am waiting for a call back from the HARP mortgage consultant just to clarify rates but other than that, my paperwork is signed and in the envelope waiting to go to UPS next day to get this done. No buydown, but I was offered a lower rate, (by a quarter%), for what amounted to a point but just can’t justify that additional expense right now.

Juanita Smith
December 12, 2011 at 4:38 pm

I contacted my Mortgage Company, Wells Fargo, the loan rep stated that I did qualify for the refinance under Harp 2 and quoted me a rate of 4.5% and I would receive the disclosure documents in the mail withing a few days. Today I got a call from Donna, she has been assigned my loan. I have not received my disclosure documents yet but we reviewed the loan request. She stated that there is a 2.5% buy down. Wow, that is not what I was told initially. I may be a little upside down, and I could use the reduced interest rate; but I am not stupid. I will do my research, but just because someone says there is a HARP 2 benefit for us, it seems that that is just a bunch of bull. I would like to hear from anyone that actually got a good refinance that meet the stated guidelines,

Sourabh
December 06, 2011 at 9:44 pm

I called my Wells Fargo today and the mortgage consultant said he can't do anything because he is still waiting to get guidelines. I do qualify under the new HARP 2 but I find this to be frustrating.

David T
December 05, 2011 at 9:24 am

Do any of the HARP 2 changes allow someone to refinance if the mortgage was originated as owner-occupied ARM, but we had to rent the property, and now it is an income property? I am sure I am not the only one in this situation. We were unable to pay for the home, so we had to rent it. Now, unless we evict, we cannot refinance under HARP 1 or 2.

Tom
November 23, 2011 at 9:06 am

I called Citi Bank and they told me that even though they had no information on Harp, I would not qualify. No late payments, employed same place for 20yrs but they knew I would not qualify.
Isn't there anything we can do about these theives?

Petunia 100
November 20, 2011 at 3:08 pm

Is there any hint about the rates which will be offered? Will they be the same as any other conventional loan, or will they be at a premium?

@Marie Biss, if your house payment is more than 50% of your income, it kinda seems you can't afford to stay in that house. If I were you, I would start liquidating junk and get that home on the market.

Scott Harris
November 19, 2011 at 10:07 pm

Finally, those of use who bought within our means, put money down, and continue to make payments on time get a break!

sharon
November 17, 2011 at 12:51 pm

So what does this mean to borrower's? We have had paperwork ready with a mortgage company for two weeks now, when will we actually be able to apply for HARP2 ? What are the interest rates associated with this program?

Marie Biss
November 16, 2011 at 10:00 pm

Looks like those of us who are not underwater and whose loans never involved F.M or Fannie Mae --and who have equiy still won't be helped by either HARP - if debt to ratio does not qualify. Our mortgage is over 50% of our retirement income, we own too much junk to liquidate quickly so cannot sell. Never late with a payment and have excellent credit but still don't qualify for any type of loan mod or refi program. Why are some of us falling through the cracks like this?

Aaron Meyer
November 16, 2011 at 5:09 pm

Holden,
Lenders don't add extra fees FNMA does in the form of Loan Level Pricing Adjustments which are required by FNMA. This document will come up in a simple google search under "exhibit 19" Also the Seller's Guide isn't released until 12/13/11 and these loans cannot be delievered to the Secondary Market until 2/1/12.