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Will HARP 3 be a charm?

By Polyana da Costa ·
Friday, May 25, 2012
Posted: 12 pm ET

Will the third try be a charm for HARP?  Industry analysts seem to think so. And so does the government.

The first version of the Home Affordable Program failed to help homeowners who were underwater. The revised version, HARP 2.0, helped some borrowers. But there's no way it will help the millions of homeowners eligible for the program. So what do we need? HARP 3.0.

That's in short what housing experts told the Senate Banking Committee Thursday during a hearing on a bill designed to help borrowers refinance their mortgages. The bill, called the Responsible Refinancing Act of 2012, would remove additional barriers that still prevent underwater borrowers from refinancing and reducing the interest rate on their mortgages.

"HARP 2 still is not designed to help enough underwater homeowners," Quicken Loans CEO Bill Emerson said during the hearing, according to a written testimony. "The current proposed legislation would enable every loan originator in the country the opportunity to help the four million HARP eligible borrowers."

Why? Simply put, because this measure would eliminate the risk of lawsuits for lenders that refinance an underwater mortgage. HARP 2.0 eliminated that risk for lenders that refinance mortgages they already service. But not for lenders that refinance a mortgage serviced by another bank.

In other words, if your mortgage is serviced by one of the large banks participating in HARP, you shouldn't have a problem refinancing because that lender has been given the guarantee that it will not be sued for giving you that refinance, even if you end up defaulting later.

But if your bank doesn’t want to do HARP, you may have trouble refinancing. There are exceptions.

Some lenders are taking the risk and refinancing mortgages through HARP 2.0. But most won't refinance a loan through HARP if it's serviced by another lender.

A mortgage servicer is not required to verify the borrower's income or assets when refinancing a loan through HARP 2.0 if the servicer already services that loan, Emerson explained to the committee.

"The same servicer only needs to verify that the borrower has a viable source of income," he says.

But the new lender must verify everything. And if it makes even a minor error, that lender could be forced to buy that loan back in the future. That notion deters most lenders.

Mark Zandi, chief economist for Moody's Analytics told the committee that these HARP changes and other measures in the bill would help millions of borrowers. The bill would eliminate upfront fees and appraisal costs related to refinancing a HARP loan.

If the legislation is implemented by the fourth quarter of this year and mortgage rates remain near 4 percent through the end of 2013, more than 4 million borrowers would be able to refinance their loans, Zandi says.

What do you think? Will HARP 3 be approved? Will it help?

What do I think? I don't understand why it wasn’t done right the first time and I'm not so sure this bill will pass. But I'm for anything that helps borrowers.

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July 23, 2012 at 11:43 pm

We're hoping this will help. We have no debt other than a primary at 6.25% and a second that is interest only on a HELOC. The two together add up to $560K, about $100K more than the home is worth. The HELOC funded a business that went down with the economy. My new job pays much less than the old one. Cancer left decent medical bills as well. I can't refinance the primary because of the HELOC and the HELOC won't work to restructure the loan to allow me to lock the interest rate and refinance the primary. I'm a sitting duck waiting for interest rates to climb where the HELOC will go up and I'll lose the home. Help HARP 3.0!

July 23, 2012 at 10:41 pm

Please help me understand why there is a date? I have good credit pay my payments on time and struggle as a single mom because of the loan date. Any chance 3.0 the date is on the topic list?

July 19, 2012 at 11:13 am

There are 2 problems with the HARP programs. The first is that purchase money 2nd's cannot be rolled into 1 loan and lenders will not refinance the second loans (most of which are over 6%). The second problem is the 2009 date of origination. If a borrower has made all payments on time and will lower the monthly payment anyone should be able to do it regardless of the origination date.