About Government Refinance and Home Purchase Programs

Like many of the government-backed refinance programs that proceeded it, the HARP 2.0 program is not running quite as smoothly as planned. The problem for borrowers is that very few lenders have chosen to participate in the program. Worse than that, some lenders that initially were participating in HARP 2.0 have recently chosen to back out of the program. The very limited number lenders participating in this program has led to long turn times. In some cases it is taking more than three months from start to finish on HARP 2.0 loans. Borrowers who have Freddie Mac loans or who have mortgage insurance are having the hardest time finding a lender who will help them with the HARP 2.0 program, and when they do find a participating lender they are in for very long waits. Borrowers with Fannie Mae loans that do not have mortgage insurance tend to get somewhat better rates and relatively faster turnaround times but with the HARP 2.0 program the process is rarely quick or easy.

But on the bright side, HARP 2.0 is up and running and while it can take months to get a HARP 2.0 loan, many underwater borrowers have waited years for a chance to improve their interest rates so perhaps a few months waiting is not all that bad after all.

Contact us in the sidebar if you have a conventional mortgage that is backed by Fannie Mae or Freddie Mac and would like to be connected with a lender who is participating in the HARP 2.0 program.

As predicted, the new FHA streamline program that launched in June created a massive stampede of FHA streamline refinances over the last month or so. But as we approach August the flood of refinance applications is slowly subsiding while interest rates on government-backed mortgages continue to drop to new all-time lows.

If you have an FHA loan contact us today to see about streamlining your mortgage to a new FHA loan in the mid to high 3’s. Likewise, if you have a conventional or VA loan fill in the contact form on the right to get a quote for a new refinances at surprisingly low interest rates. With rates at all-time lows again it is starting to make sense for more and more people to take another look at refinancing. And with the backlogs in underwriting starting to ease finally the wait times on many government-backed loans won’t be as long in the latter half of the summer as they have been in the first half.

As the European debt crisis slogs along, mortgage interest rate in the US continue to test new lows. Unfortunately the number of borrowers who are able take advantage of the record low rates seems to be shrinking. While borrowers who have equity, solid credit, and enough income can still refinance to the record low rates through authorized lenders on our list, it is becoming more difficult for borrowers who are underwater on their mortgages to refinance. Fewer and fewer lenders are participating in the main refinance programs targeted toward underwater borrowers, the FHA streamline program and the HARP program. Part of the problem is lenders are leery about adding new upside-down mortgages to their books. The launches of the new FHA streamline program and the HARP program have sent many thousands of underwater borrowers in search of refinances from these programs and as a result of the popularity of these programs many banks simply have lost their appetite for funding such loans. If the problem persists the federal government might have to come up with greater incentives for lenders to participate in these programs because the programs will not do any good if none of the authorized lenders are willing to participate.

The good news is that some authorized lenders are still participating in both programs and it is still possible to get an FHA streamline or a HARP loan… for now. But with the retreating we are seeing among most authorized banks recently there is not telling how long both programs will be available. The HARP 2 program is already available among so few lenders that in many cases where the home is significantly underwater borrowers are looking at waits of three or more months to close their HARP 2.0 loan. With any luck the FHA and Fannie/Freddie will step up to make these programs more appealing and less risky for lenders soon.

In the meantime, contact us in the sidebar today to learn more about which programs are the best fit for your family. All of the government-backed refinance programs are still available for now so getting going now while rates are testing new lows is probably a very good idea.

We have been getting some questions on what to expect on interest rates for HARP 2.0 loans. The simple answer is that as of May 2012 rates on HARP 2 loans have reportedly been mostly in the mid to high 4’s. Here are some more details:

– If your 1st mortgage is less than 125% of the current value of the home you can get a HARP 1.0 rate. Those rates have been a bit lower than HARP 2.0 loans. HARP 1.0 rates have reportedly been mostly in the mid to low 4s this month.

– Don’t expect rates at 4% or less for a 30 year fixed HARP loan. HARP loans, while subsidized by Fannie or Freddie, are still high risk loans because they by definition are for homes with little or no equity. As a result 30 year fixed HARP loan rates are not the extremely low teaser rates banks love to advertise to lure customers in.

– Freddie HARP loans tend to have higher rates than Fannie HARP loans. Authorized lenders nearly universally report that Freddie is more difficult to work with than Fannie and thus investor demand for Freddie loans is lower than for Fannie loans. The end result is that rates on Freddie HARP loans are routinely as much a .25% higher than rates on similar Fannie HARP loans.

– Rates on non-owner-occupied HARP loans tend to be higher than rates for owner occupied properties.

– The rate and fee hits for lower credit scores are surprisingly minimal on HARP 2.0 loans. In other words people with less than optimal credit can often get the same HARP 2 rates as people with great credit scores.

We’ll post on more quirks and details of Fannie vs Freddie HARP loans soon. But in the meantime contact us in the sidebar to have us look at your specific situation. If you look like a good candidate for a HARP loan we can connect you with an authorized lender who can get you an quote on a HARP loan.

With so few banks fully participating in the HARP 2.0 program we are getting reports that the authorized lenders who are participating are beginning to experience delays in underwriting because of high demand for the program. Sources within participating banks tell us that underwriters who used to be able to complete a review of a file a few days after submission are now sometimes taking a couple of weeks to even get to files because of the volume being submitted. They expect the wait times to get longer an longer in the months to come as more borrowers become aware of the newly rolled out program.

We expect a similar underwriting traffic jam for FHA streamlines in June when the new FHA streamline program begins.

If you have a conventional loan backed by Fannie or Freddie and are interested in the HARP 2.0 program or if you have an FHA loan and are interested in the new FHA streamline program contact us in the sidebar right away to be connected with a participating authorized lender. The sooner you can start the process the better because as awareness of the program increases so will underwriting turn times.

As we have noted here recently the HARP 2.0 program is now up and running. A few authorized lenders are fully embracing the new program but most lenders/banks are either ignoring HARP 2.0 or only partially implementing it. (Contact us in the sidebar to be connected with an authorized lender that is fully implementing HARP 2.0).

As the HARP 2.0 program has gotten under way it has become evident that borrowers who currently have Fannie Mae loans have been getting appraisal waivers more often than borrowers who have Freddie Mac loans. The way the process works is the authorized bank inputs the loan details in the the Fannie or Freddie preliminary underwriting software and that software comes back with results, including preliminary approvals or denials and results on whether appraisals will be required or not. Early reports from participating lenders indicate that the Fannie Mae software has been waiving the appraisal more often than not. The Freddie Mac underwriting software has been much more likely to require an appraisal as part of the refinance process. There are rumors that the Freddie software will be getting an update and it will be easier to get an appraisal waiver with Freddie loans soon too but time will tell.

Of course in the end the appraisal is mostly an inconvenience because the HARP 2.0 program when fully implemented allows for refinances no matter how low the appraisal comes in. Still, avoiding the appraisal makes the refinance process go faster and saves borrowers a few hundreds dollars up front.

If you have an conventional loan backed by Fannie Mae or Freddie Mac (see here to check) and would like to learn more about the HARP 2.0 program or to be connected with a fully participating authorized lender/bank contact us in the sidebar.

While most authorized lenders are still not fully participating in the HARP 2.0 program, a small but growing number of them on our list are. The early returns indicate that it remains easier to get a HARP 2.0 loan for Fannie Mae loans than for Freddie Mac loans. The same holds true for appraisals — the Fannie underwriting software is more likely to allow an appraisal waiver than the Freddie underwriting software. Nevertheless the program is fully operational now for both Fannie and Freddie conventional mortgages. The HARP 2.0 program is allowing refinances for underwater home mortgages regardless of loan to value ratios and it is allowing mortgage insurance to transfer. Those two things were not allowed with HARP 1.0.

Contact us in the sidebar today if you have a conventional mortgage that was originated prior to May of 2009. Odds are pretty good that your mortgage will be invested in behind the scenes by either Fannie or Freddie and if it is you could be a good candidate to significantly reduce your interest rate and monthly payments through the new HARP 2.0 program.

Fannie Mae and Freddie Mac officially began accepting HARP 2.0 loans this week. On the ground just a handful of authorized lenders have begun testing the waters with the new program. Some lenders are allowing refinances above the 125% loan to value. Other lenders are allowing mortgage insurance to transfer for the first time. But the reality is that the adoption of HARP 2.0 is tentative at best so far. The general trend early on is that borrowers with conventional loans backed backed by Fannie Mae will have more luck than borrower with conventional loans backed by Freddie Mac. The hope is that over time more and more lenders will more aggressively adopt the new program but only time will tell. Contact us in the sidebar to learn more about the HARP 2.0 program or the other government-backed refinance programs that are available.

[Update: See this page for the most updated info on the HARP 2.0 guidelines or contact us in the sidebar for guidance on your specific situation]

Here are the links to the recently released HARP 2.0 guidelines.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/sel1112.pdf
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1122.pdf

In short, here are the changes these guidelines describe:

– Starting December 1, 2011 authorized lenders were able to begin the loan application process for borrowers who have Fannie/Freddie mortgages with a current loan to value greater than 125%. HOWEVER those HARP 2.0 loans cannot be approved until March 2012 at the soonest because the Fannie/Freddie approval software will not be updated until then. So the soonest a HARP 2.0 loan with an LTV of more than 125% could actually close is probably April of 2012.

– For Freddie Mac loans, if the first mortgage is less than 80% of the value the home the first and second mortgage combined cannot be more than 105% of the current value of the home. (There will probably be price breaks for these loans though).

– There is apparently no change to the eligibility dates so people who got their current Fannie/Freddie loan after May of 2009 appear to not be eligible for HARP 2.0 still.

– There is no mention of changes to the mortgage insurance rules. The official guidelines of HARP 1.0 allowed for MI to transfer already but we do not know of any authorized lenders or MI companies that allowed that. We will have to wait and see if there is more incentive for lenders and MI companies to allow it with the new program.

The other questions yet to be answered over the coming months are:

1. How many authorized lenders will participate in the HARP 2.0 program? There are no requirements for lenders to participate.
2. What will the pricing be for these high LTV HARP 2.0 loan? (Probably significantly worse than loans with lower LTV’s)

So while these guidelines shed some light on the new program there are a lot of questions still to be answered. Stay tuned.

Fannie Mae reportedly has removed its “ability to pay” requirements from the HARP 2.0 guidelines. That means that families that have suffered from reduced income over the last few years might be able to qualify for the HARP 2.0 program. The program will still require no recent 30 day late payments on mortgages but the income qualifying requirement that tripped up so many people may be going away. This change is especially good news for borrowers who are self employed and have had trouble proving income in recent years. Here is an excerpt from a recent HousingWire article on the subject:

Lenders are no longer required to determine a borrower’s ability to repay a loan when underwriting mortgages for inclusion in Fannie Mae’s HARP 2.0 refinancing channel.

Barclays Capital made that conclusion in its securitized products research report Wednesday.

Barclays said Fannie Mae is adjusting its seller guidelines for HARP 2.0 after discovering the “borrower ability to pay clause” is preventing a large chunk of underwater mortgages from entering the program.

Under the changes, the ability-to-pay clause is no longer considered an underwriting requirement for Fannie’s HARP 2.0 program. Instead, Fannie Mae now stipulates that no debt-to-income calculation is required for these refinancings as long as the borrower’s payment does not increase by more than 20%, according to Barclays Capital.

While the HARP 2.0 program won’t be fully operational for a month or two please contact us in the sidebar now to see if you can qualify for it or another government-backed refinance program.

Beginning on Thursday December 1, 2011 applications for the HARP 2.0 program can technically be started. We say “technically” because as of now no authorized lender has implemented the program.

As we have discussed in the past, the HARP 2.0 program only applies to loans that are currently backed (invested in) by Fannie Mae or Freddie Mac. In addition the Fannie/Freddie loan must have been funded prior to May of 2009 to qualify for the HARP program. For the millions of loans that meet those requirements the HARP 2.0 programs is designed to allow homeowners to refinance to a lower rate without having to add private mortgage insurance (PMI) even when the loan is more that 80% of the current value of the home. The HARP 1.0 program allowed borrowers to refinance up to 125% of the current value of the home but the HARP 2.0 will do away with that 125% limit. In addition the HARP 2.0 will reportedly be available to borrowers who are currently paying PMI on their Fannie/Freddie loan.

Fannie and Freddie have announced that they will not have their underwriting software updated until March of 2012. As a result the bulk of the HARP 2.0 loans will not be able to be closed until then. What remains to be seen is if some lenders will be willing to manually underwrite HARP 2.0 loans before then. We will monitor the situation and report on any announcements regarding that here.

In the meantime we recommend you fill in the contact form in the sidebar to see which government-backed refinance programs apply to your situation.

The details of the new changes to the HARP program are reportedly going to be released on or before Tuesday November 15th. The release of the operational details is a crucial step in the roll out of the so-called HARP 2.0 program. However the program will probably not be functional on the ground level for several weeks after that.

Please note that the federal government does not lend directly to consumers with this program. Rather the HARP program is outsourced through authorized lenders so the actual implementation of the new program requires those lenders to be ready to originate and fund loans under the new program. Fully implementing new programs like this generally takes weeks or even months.

Contact us in the sidebar to learn if you are a candidate for the HARP 2.0 program or other government-backed refinance programs and to be connected with an authorized lender.