It appears that more homeowners with little-to-no-equity are gaining an interest in refinancing. More importantly, they’re gaining confidence that there is an option. This is good news as it appears the Home Affordable Refinance Program (HARP) is gaining both momentum and attention.
This seems like the right time to give homeowners an extensive guide to HARP, including who it best benefits, how to give homeowners the best shot of getting approved as well as other options to low-equity refinancing.
To clarify one fact about HARP that many homeowners do not know, YOU DO NOT NEED TO USE YOUR CURRENT LENDER TO GET A HARP LOAN. Shop your HARP loan like any other refinance. The only exception to that rule is if your current loan has PMI, which can only be refinanced through your current lender at the moment. Even then, a very small handful of lenders will do a HARP loan with PMI. Also, HARP is not limited to homeowners only. You can use HARP on 2nd homes and investment properties as long as the loans are owned by Fannie Mae or Freddie Mac. In fact, they are actually perfect for investment properties. You can read more on this topic here. This contradicts the Making Home Affordable website, which states you may be eligible for HARP if “Own a one- to four-unit home that is your primary residence.” I can tell you from first hand experience that you can use HARP on 2nd homes and rental properties.
The HARP program was designed to help homeowners who are looking to refinance but have lost some to all of their equity in their home. It only applies to homeowners who currently have a Fannie Mae or Freddie Mac owned loan, but that does not mean HARP is a homeowners only choice. In fact, there’s surprisingly several opti0ns available to homeowners that may not have considered, nor did their lender give as an option. In this post, I will cover who qualifies for a HARP refinance, who best benefits from HARP guidelines, which customers do not qualify for HARP and some alternatives to consider. One EXTREMELY important detail to note is you cannot refinance under HARP if you have already applied for a modification (HAMP-Home Affordable Modification Program. If you haven’t decided which is better for you, apply for a HARP refinance first. If your HARP refinance application is turned down, you can proceed with a modification application. Attempting to modify your loan first will disqualify you from a HARP refinance.
WHO IS FANNIE MAE AND FREDDIE MAC, AND HOW DO I FIND OUT IF THEY OWN MY MORTGAGE?
One topic that is very confusing for homeowners is finding out who really owns their loan. You think it would be as simple as looking at the name on your mortgage statement, right? Not so. In fact, it’s very rare for a loan to be truly owned by the company you make your payments to. Lenders usually sell their loans to another entity. They also will collect payments in behalf of that entity which is called “Servicing.”
Let’s suppose you buy your house using Wells Fargo as your lender. Wells Fargo then sells your loan to Freddie Mac. Wells Fargo still collects your payments and passes the payments back to Freddie Mac while collecting a small fee for the service. In this scenario, your loan is owned by Freddie Mac but Wells Fargo is your servicer.
There are several steps you can take to find out if Fannie Mae or Freddie Mac owns your loan. It’s vital to try all options before you give up because not all methods work the first time.
The first place to check to see if either Fannie Mae or Freddie Mac owns your mortgage is an online property lookup tool
Fannie Mae’s lookup tool:
http://loanlookup.fanniemae.com/loanlookup/
Freddie Mac’s lookup tool:
https://ww3.freddiemac.com/corporate/
If your property does not show up on either of the property lookup tools, you should still call Fannie Mae or Freddie Mac to see if they own your mortgage. Fannie Mae and Freddie Mac do not always have the exact address saved correctly. This is why it’s important to call.
Fannie Mae’s phone number:
1-800-732-6643 or 1-800-7-FANNIE
Freddie Mac’s phone number:
1-800-373-3343 or 1-800-Freddie
If you don’t have luck there, contact your current servicer and see if they know if you have a Fannie Mae or Freddie Mac loan. Lastly, you can have the mortgage company you’re applying a HARP loan from run an automated approval through Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector software and it may indicate if the property qualifies for a HARP loan.
MY LOAN IS A FANNIE MAE OR FREDDIE MAC LOAN. NOW WHAT?
First, find out if your current loan has mortgage insurance. As it stands now, HARP guidelines require that you work only with your current servicer if your loan has mortgage insurance. However I have not heard of one servicer who will do this loan. This topic was covered in my blog post, “Another Flaw With the HARP Program.”
HARP guidelines say a homeowner can finance up to 125% of their home value. Most lenders are still following the original guidelines of 105% but a couple of lenders are beginning to finance up to 125%. Both of these limits are for a first mortgage. Currently, HARP guidelines do not have a limit to how high your combined-loan-to-value (CLTV) is which means if you have more than one loan, the total amount you owe against your house is not considered in the qualifications of a HARP loan as long as the first mortgage is in the 125% allowable range.
Even though Fannie Mae and Freddie Mac both allow above 100% financing, please note that the loan pricing is more expensive. HARP loan pricing is best suited for 95% combined-loan-to-value or less meaning you’ll get your best rates and fees if you have at least 5% equity between all loans owed against the house. Pricing is increased between 95.01-97% and increased again for anything above 97.01%. This means you’ll want to be very careful of how much you borrower on your house if your loan amount is near the value of your home. If your current Fannie Mae or Freddie Mac loan does not have mortgage insurance, you will not be required to get mortgage insurance on your new HARP loan. This is one of the major benefits of doing a HARP refinance.
These programs are also very credit score driven. Best pricing is for homeowners with a 720 credit score or higher. You can answer a quick 4 question eligibility test on the HARP website here.
Here is a quick summary of the HARP loan requirements:
- your loan will need to be owned by Fannie Mae or Freddie Mac
- your current loan should not have mortgage insurance (you can contact your current servicer per guidelines but I have not heard of one servicer who will do this yet).
- you can go as high as 105% of your home value with most HARP lenders and 125% with a few lenders but preferably be at 95% or lower for best pricing.
UPDATED May 29th, 2010-
There have been two major hurdles on HARP loans that appears to be much easier to overcome. One, many HARP lenders are now implementing price caps. What does that mean? Simply this…it doesn’t matter how bad your refinance situation looks, you’ll never pay more than “X” over the best interest rate that lender has to offer. Lower credit, condo, investment property or second home, you will not have to pay the huge premiums that HARP loans had last year. Not all lenders implement a price cap, so it’s important to shop your loan. Remember when I said you do NOT HAVE TO USE YOUR CURRENT LENDER? I can’t stress this enough. Most of the rates/fees I’m seeing from current lenders are much higher. I have a feeling that most of these lenders know that their current customers check with them first, so they build large premiums in their pricing. Dont’ pay too much for your loan…be sure to shop it around!
Two, if you once applied for a HARP loan and was denied because you have a second mortgage that would not allow you to refinance your first mortgage (called a subordination agreement), many lenders have worked with the government and are now allowing subordination. Below is a list of lenders who I’ve been able to get the subordinations approved with relative ease even though the loan amounts exceeded 100% of the home value:
- Bank of America
- Wells Fargo
- Chase
- GMAC
- Citibank
- Flagstar
- Everbank
- Key Bank
UPDATED June 17th, 2010-
It’s important to know that HARP is only eligible for loans that were purchased by Fannie Mae by March 1st, 2009 and May 31st, 2009 for Freddie Mac according to a source. A colleague of mine (Rhonda Porter at Mortgage Master Services) recently worked with a client who originated a loan LONG before March 1st, 2009 but Fannie Mae did not securitize (or purchase) the loan from the lender until after this date. This made the loan ineligible for a HARP refinance. Here is an excerpt of her blog post here:
We also need to eliminate the securitization factors of when Fannie or Freddie bought the existing mortgage for it to be eligible for a HARP refi. I recently had a client where it showed on Fannie Mae’s site that he indeed has a mortgage owned by Fannie Mae–it was not until we received an error message trying to underwrite it through DU (the automated underwriting system) that we called Fannie Mae to discover that the loan had been securitized (purchased by Fannie Mae) one day too late to qualify (March 1, 2009). This person’s loan closed in December 2008, was sold the the bank and then took months for Fannie Mae to purchase. This means this upside-down home owner does not qualify to reduce his payment by $250 per month. Imagine what the $250 a month would do for him and/or the economy. It gives him some probably needed monthly financial wiggle room and he just might spend a little more which helps our economy too.
To read more, CLICK HERE
I NEED OTHER OPTIONS. WHAT ELSE IS OUT THERE?
Surprisingly, there are some great options available if you do not qualify for a HARP loan or you don’t like the pricing.
A great alternative for the general public is FHA. FHA allows up to 97.15-97.75%(depending on your area) of the home to be financed. What makes FHA special is they do not have a limit for combined loans AND there are no negative pricing adjustments if the 2nd mortgage exceeds 100% like HARP loans. Let’s suppose you have one loan at 95% of the home value and a second mortgage equal to 15% of the home value. The two loans together equal 110% of the home value. You then can pay off just the first mortgage with a FHA loan and keep the second mortgage above 100% of your value. More importantly, FHA has much lower credit score requirements, the previous loan does not need to be a Fannie Mae or Freddie Mac loan and it doesn’t matter if the loan being paid off has mortgage insurance. The only caveat is that all FHA 30 year loans require mortgage insurance.
My favorite option using FHA is their 15 year mortgage. FHA allows a homeowner to finance up to 90% of their home on a FHA 15 year loan with NO MORTGAGE INSURANCE. The same guidelines regarding combined value and credit apply as above.
Let’s say I have a homeowner who is interested in a 15 year fixed loan and no equity. They have a loan equal to 85% of their home value and a second mortgage equal to 25% of their home value for a total value of 110%. They can refinance on a FHA 15 year loan and payoff the first mortgage and keep the remaining second mortgage. They do not pay mortgage insurance on the first mortgage and there are no pricing adjustments for the 2nd mortgage exceeding 100%. Yes, 15 year loans have a higher payment since the pay off is faster, but between the lower rate of a 15 year loan and the removal of mortgage insurance, much of the payment increase is covered. Plus this loan will pay down the borrower’s balance faster helping the homeowner gain their lost equity back.
Second, military veteran’s should find out if they can finance their new refinance with a VA(Veteran’s Affairs) loan. In October of 2008, the department of Veterans Affairs opened up the guidelines for veteran’s to allow them to refinance higher loan amounts and up to 100% of their home value when paying off an existing non-VA loan. This is a huge improvement to previous guidelines which only allowed up to 90% of the home value with a maximum loan amount of $144,000. However, the VA does not allow the loans to exceed 100% of the value under any circumstances. If you have two loans and they equal above the value of your home, you cannot do a VA loan.
To recap, here is a summary of when you would want to consider government loan programs:
- For veteran’s who owe up to 100% but not over 100% of their value, VA is a great loan option
- Homeowners who owe up to 97% of their first mortgage and have a second mortgage above 97% should consider a FHA loan. If the homeowner’s first mortgage is not a Fannie Mae or Freddie Mac loan, FHA will likely be their only option.
- Any homeowner who has little equity and does not have a loan owned by Fannie Mae or Freddie Mac should consider a FHA loan.
- FHA 15 year loans do not require mortgage insurance as long as the FHA loan is at 90% of the home value or less REGARDLESS of the 2nd mortgage balance and combined loan-to-value.
UPDATE 9-1-2010
New FHA guidelines will no longer allow financing with second mortgages exceeding 100% of the home value. All FHA applications dated after September 7th, 2010 will be subject to these new guidelines. Read more about how this affects homeowners who are applying for a refinance with a second mortgage here:
http://www.keaneloans.com/2010/09/01/problem-with-new-fha-short-refinancpayoff-program/
MORE OPTIONS?
For the most part, homeowners are limited to the loan products above. However, that does not mean they do not have other options. Whether a homeowner needs a little more equity to qualify for any of the loan options above or to improve their loan pricing, they may consider getting another loan somewhere else to cover the cost.
One suggestion I’ve given clients that has helped is getting a 401k loan. 401k loans are loans taken against a person’s retirement plan. It’s not a withdrawal of retirement funds, so the person does not pay tax or penalty costs for the loan. In many cases, the interest the person pays on a 401k loan is actually used to fund their retirement account which means they’re paying interest to themselves.
On a Fannie Mae HARP refinance (DU Refi Plus), the additional cost from a 95% loan-to-value loan to a 97.01+% loan is a 1.75% fee. This means if your appraisal shows you have 2.99% equity or less, you have to pay a 1.75% fee or higher rate compared to someone that had 5% equity. If you could get a small 401k loan to cover the difference, it may be worth your while. On a $200,000 loan amount, a 1.75% fee is $3,500! Borrowing $4,000 (2%) more in equity that you will pay yourself back to save a $3,500 fee you will never get back is a great money-saving solution.
UPDATE
If you are looking to do a HARP refinance and currently have a fixed mortgage through Freddie Mac, you cannot do an Open Access Freddie Mac HARP refinance to an adjustable rate. You can only refinance to another fixed loan.
UPDATE
The HARP program was set to expire on June 10th, 2010. The program was extended and now is set to expire on June 30th, 2011, approximately one year later. News of this extension can be found here.
FHA REFINANCE FOR UNDERWATER MORTGAGES-
FHA just announced that they will be rolling out a new program to help underwater homeowners. This was announced along with some updates to the HAMP program.
UPDATE AUG. 6TH, 2010
HUD released a press release regarding this program:
| HUD No. 10-173Brian Sullivan (202) 708-0685 |
FOR RELEASE Friday August 6, 2010 |
FHA LAUNCHES SHORT REFI OPPORTUNITY FOR UNDERWATER HOMEOWNERS
Effort designed to encourage principal write-downs for responsible borrowersWASHINGTON – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.
The actual guidelines for FHA were also released on HUD’s Mortgagee Letter 2010-23. Lender use mortgagee lenders as their guideline to originate FHA loans, which means that lenders should be approving these mortgages now. What I found that was interesting is that existing FHA guidelines technically already allowed these types of refinances. The limit on the second lien mortgage is actually a cap that used to not exist on FHA financing.
The mortgagee letter does begin to illustrate the benefit the second lien holders will receive for taking reduced payoffs. The letter indicates each servicer will receive $500 and incentives based on combined-loan-to-value.
Existing second mortgage lien servicers will be entitled to a one time incentive of $500 for each successful closing. Existing second mortgage lien investors will be entitled to an incentive based on the combined loan to value of the existing lien and all senior liens associated with the mortgage. The actual incentive pay-out schedule and more information on this program will be available at www.hmpadmin.com.
The announcement states that the program will begin September 7th.
I’ve studied the material for this new program and surprisingly, it’s not that different than a regular FHA loan. The difference is the government is giving incentives to the homeowners existing lenders to write down their loan balances, thus allowing the borrower to qualify for a new FHA loan. Here are the requirements:
- The new FHA loan can be as high as 97.75% of the homes value
- The homeowners existing loans cannot be a FHA loan
- For the existing lender to qualify for government incentives, the first mortgage must require at least a 10% write-down from the original balance of the first mortgage
- The government is also giving incentives to second lien lenders as well. They will give them incentives to write-down their balances so the combined value of the first and second mortgage do not exceed115% of the home value. As you’ve seen from my original posting regarding FHA loans, FHA allows second mortgage companies to have an infinite value over the value of the home as long as the FHA first mortgage is at 97.75% or less. This is one difference between this program versus a regular FHA loan.
- The refinance is voluntary, so both the homeowner must agree to the refinance terms and the existing lenders must agree to the write-down of their loan balance.
- The homeowner cannot be late on their mortgage payments
- The homeowner must occupy the property
- The minimum credit score for this program is 500 (Though I doubt lenders will fund new FHA loans with a score this low)
- The total house payment, including the payment of a second mortgage, must be no greater than approximately 31% of the homeowners gross income. Further, the total household debt cannot exceed approximately 50%. (I love how they use “Approximately” in the definition).
They key to this program is that the government is INCENTIVIZING lenders to write-down their loans. What does this really mean? The lender writes off the balance of the loan exceeding 97.75% of the homes value and the government will give them money to help recoup the losses. It’s for homeowners who have paid their mortgage on time, so it’s right in-line with HARP clients. There are two major differences. When a homeowner refinances on this program, they will owe less on their house thanks to Uncle Sam. Also, they can refinance to a low 30-year fixed rate regardless of what kind of loan they have. This may end up being the solution for homeowners who have loans with mortgage insurance.
There are many details that still need to be answered. FHA currently has loan limits depending on the county. Will these loan limits remain? My guess is they will, so be sure to check your local FHA loan limit here. They have not said who can originate these loans yet either. I hope that they have learned from their mistakes with HARP and allow any lender to originate the new loan. HARP loans with mortgage insurance required homeowners to work with their existing lender, yet none of the major banks who participated in HARP have begun refinancing homes with mortgage insurance.
If this program is available to all FHA lenders, this has the potential to be a big success. However, there are many obstacles to overcome. First, every lender will need ample time to service the write-down requests and the origination of the new loans. At the time of this update, HARP has available for approximately a year, yet many lenders are still giving homeowners difficulty. If this program has an expiration date of anything less than 2 years, it will have little impact on our housing market. Except, of course, if the government extends it (that tends to be norm these days).
This brings up two questions. When will lenders start offering this program and what incentives are given to the lender from the government? The “Frequently Asked Questions”of this program state the program will be rolled out immediately and will hopefully be in affect this fall. I will be researching to find out what the incentives are for the lender. If the incentves are minimal, this program will fail. If the incentives are too large, it raises the question, “Who’s paying for this?” I believe all of us can answer that question.
For lenders, it sounds like we’ll be wearing two hats. Originating a new FHA loan and negotiating a principal balance write-down with the current lenders. I’m interested in seeing how this plays out.
Be sure to revisit this blog post for any updates.
FHA REFINANCE UPDATE 6/9/2010
I confirmed with HUD (The Department of Urban and Housing Development) that FHA will insure these refinances regardless of the new lender. This means consumers can competitively shop a FHA refinance for a reduced balance payoff. The program is fairly straight forward and easy enough that we should see some success. That said, HARP is a very straight forward program but I hear horror stories almost daily, so like HARP, I don’t expect all lenders to execute these well.
The unique twist to these refinances that will hold up many refinances from closing is the negotiations with the existing lenders. Lenders and loan officers are having a hard enough time closing the loans. Negotiating an existing lender to take a lesser amount opens up the chance for increased liability and error. I believe the most successful lenders will likely be working with attorneys who will handle these negotiations similar to loan modifications and short sales. I’ve already begun speaking with attorneys who specialize in these services to see what they’re opinion is of this program. Stay tuned for updates.
Although FHA guidelines allow for these refinances, many lenders will not close these loans. If you’re looking for a refinance of this type, be sure to find a lender who can do this loan first, then see if there’s a loan officer at the firm who has experience with these transactions. They’re new, so don’t expect great results if you’re an early adopter. I will provide updates of my experiences and post lists of lenders and loan types I’ve had success with. Follow this post in the future for these updates.
For FHA to insure a refinance with a short payoff, the borrower must prove
- There is insufficient equity in the home based on it’s current appraised value AND/OR
- The borrower has experienced a reduction in income and does not have the capacity to repay the existing indebtedness against the property.
Unlike short sales and loan modifications, the borrower will not be asked to slow pay their mortgage to qualify. FHA allows a couple of late payments but nothing more than 2x 30-day late payments in the last year and the loan cannot currently be late.
Quick Update, if you are having troubles getting the second mortgage companies to subordinate on your HARP refinance, be sure your lender is sending the request stating it’s for a DU Refinance Plus for Fannie HARP loans and Open Access for Freddie HARP refinances. I just learned that many lenders, including B of A, are more likely to do the subordination if that is stated on the request.
Wells Fargo does HARP refi’s with mortgage insurance.
Darci,
That’s great news! After hearing of dozens of horror stories, this is the first I’ve heard of this.
Was this your refinance?
hey guys, I like many others bought a house in the last 5 years and now am stuck with a home that I owe quite more than its worth. Im going through a loan modification at the time and used this mod guide I found at http://www.modifyingmadeeasy.com. The guide only cost me 19.95 and has helped me understand the process I’m going through. I recommend to all, best of luck.
I have several past clients that have to request a loan modification for various reasons. I have been referring these clients to the http://www.AssistYouWith.com website. They prepare the paperwork and make sure you have a complete package to submit.
Our company is currently working the HARP up to 105%. Thanks for the headup on the subordination request because we are getting some resistance from the Seconds.
Does anyone know of any Lenders doing the VA loan modification programs? I can’t seem to find anyone to help the Vets and the Lenders don’t seem to know the program.
Randi,
I haven’t heard of anybody doing mods on VA loans. I think the VA is resistent to modifying their loans because their streamline guidelines are so light. Most mods being done are short-term modifications which are similar to VA 5/1 ARM’s with a fixed 5-year initial period and 1% increase each year after (the max adjustment on VA ARM’s is 1% after the 5th year on certain VA ARM’s).
Thank you for the information BUT once again I find myself unable to refinace due to 2 circumstances: 1) My cresit score is only 680 and 2) I have a freddie mac loan with 300/month PMI that banks are NOT refinancing. I feel totally trapped!! I cannot wite off the PMI because the house was purchased approx 1 week before the law came into effect that I could write it off, Dec 15th, 2006. I cuurently throw 301/month out the window!! Needless to say I am trapped in a mortgage that is way TOO high-2,425/month for a 272, 000 house. ANY advice would be helpful. Thank You!!!
Kathryn,
Who is your servicer? Also, how much do you think your house is worth? According to another person who commented here, Wells IS doing HARP loans with PMI. Also, maybe FHA could work. Let me know what your approximate value is and let’s see what we can do.
Keane
My lender is BOA, I owe 272,000. I recently had it appraised at 340,000 FHA through a private broker. However, a semi-comprable house down the street just sold for 241. However, we have put over 25,000 in updates into this house over the past 3 yrs. From what I understand, I cannot utilize another lender like wells fargo for a BOA loan.
Kathryn,
If you have an appraisal done and it’s a FHA appraisal for that amount, you’re good. The recent sale could affect value but details of that sale would need to be considered before including. You only need a value around $285k-290k to make a FHA loan work. I think that is your solution.
Keane
I have been struggling to get Bank of America to refinance my loan under HARP program, but they refuse it because of LPMI. I am really perplexed since Wells is doing it however Bank of America is getting away scott free and they have the odacity of giving ads in the TV which show them as taking care of their customers and american people.
They refuse to do it even if teh guidelines of DUrefi Plus clearly permit such refinancing
How do we get our voices heard
Thanks
Avinash,
This is exactly what I blogged about on my “Another Flaw with the HARP program”. As consumers become more interested in a HARP refinance, more of them will become very angry when they learn the largest bank in America will not do their refinance even though it fits guidelines.
At the moment, there’s still nothing you can do. Did you read the other options in this blog? Can you maybe move to a FHA loan?
Keane
Keane:
I have a 30 year fixed 5.875% mortgage with a 40% LTV that I wish to refinance at a lower rate. The home is currently occupied by caretaker/tenants while we are on an extended stay with our children but we expect to return to our home during the next two years or before. We have heard that Freddy/Fannie will not allow the refinance of non owner occupied single family tenants but this make no sense to us at all. The house is on 12 acres on a moutain top. surely it is in Freddy/Fanny’s best interest to have it occupied. what can we do?
Ken,
Your scenario sounds 100% acceptable. The caretakers do not make your property non-owner occupied. It is your home and will remain your home. At worse, a lender may want you to refinance this is a non-owner occupied home which has a price adjustment, but from what you’ve shared, this wouldn’t be necessary. I’ve done refinances for soldiers who let their family stay in their home while they’re away. It doesn’t change the fact it’s your home that you live in. The caretakers would need to be aware of the refinance and let the appraiser in to visit the home. Other than that, it’s fine.
Keane
Keane,
Here is our story. We bought our house in 1998 at $157,000. We refinanced and our current mortgage is $166,000 at 6.25%. Everything was going fine until the recession hit and my husband was laid off in Feb. 2009. We have managed to keep our house payments current and in doing so we now have about $10,000 in credit card debt. It looks as if it may be another few months before work is available again. We were denied the modification program and just recently inquired about the HARP program. We were denied that as well due to our credit score. I am going to inquire about the FHA loan tomorrow, do you have any other advice for us if we are turned down for that as well. We really don’t want to become delinquent on our mortgage payments, but we are really getting scared that might happen. What can we do, we have never missed our payments in the past, but one of the reasons our credit score has suffered is that we have focused on our mortgage and only paid bills such as our utilities a certain amount a month. We always make a payment to them, just not the full payment. Any advice? Thank you very much.
Steve and Dawn
Steve and Dawn,
I can tell you two are doing what you can.
FHA loans do allow a more lenient credit score than HARP loans do. What is the estimated value of your home? That will help with finding out.
I wouldn’t give up on the modification option either. We are finally starting to see reputable companies who will help homeowners modify their loan terms. I wouldn’t give up on that yet.
Keane
If you qualify for a HARP refinance of the first mortgage can you refinance the second with the second mortgage holder under the program? If not can you attempt to refinance the second mortgage? Thank you.
The HARP program is only for refinancing Fannie Mae and Freddie Mac loans on a rate/term refinance. I believe there was a time that Freddie Mac actually offered both the first and second mortgage, but I may be wrong. Almost every Fannie Mae and Freddie Mac loan is a first mortgage, so likely no, you cannot refinance the 2nd on a HARP.
You can refinance the 2nd separately but if you’re above 100% value, nobody will likely do it.
Keane
We have been trying to refinance our home since December 2008 with Wells Fargo. Built our home in 2001. We have our 1st with Wells $289,000 and a 2nd also at Wells for $250,000. Our home appraised at $534,000 in 2009. We have numerous complaints about the appraisal (said we had a wood fence when it is a block fence, home is custom blueprinted not stated, and the list goes on and on)is there an agency to lodge a complaint against the appraiser? His appraisal is causing the problems with our loan. Our neighbors home just sold for $599,000 and is smaller sq feet, less custom, etc. than ours. Wells Fargo is now suggesting that we do a HARP loan to refi? Any suggestions we are just trying to get a lower rate?
Sandy
Sandy,
You can try to do a HARP refinance. Remember that FHA loans allow for above 100% value on two loans combined. There’s also no price adjustments like HARP loans. You do have to pay mortgage insurance on a 30 year loan but you don’t on a 15 year loan up to 90% of the home value.
I’m doing a FHA refinance for somebody right now up to 90% on a first mortgage (15 year) and keeping the second over 100% of the value. It’s nice because we’re paying off as much of the 2nd mortgage as we can up to 90%, which you can’t do on a HARP.
I would heavily consider a FHA loan depending on the rates you have on your current loans.
One more tip for everyone out there:
HARP loan guidelines can be very helpful in obtaining high loan-to-value financing but every appraisal is still subject to an appraisal desk review by the lender.
The new Home Value Code of Conduct (HVCC) rules followed by Fannie Mae and Freddie Mac make it less likely that you will have to deal with an appraisal review adjustment, but it is still possible. Especially if your property is very unique compared to homes in your market.
We are trying to refinance through HARP. Our loan is through Chase, it is our primary home and we do not have a 2nd mortgage on it. Our loan is owned by Fannie Mae, we do not have PMI on it. We have excellent credit score and a LTV of 92%. We are being told by Chase that while we met the HARP and Fannie Mae requirements they will not refinance because our home is a condominium. We live in NYC. We have tried through other banks (BoA, Citibank, HSBC) and they have told use they will not do a HARP refinance for another bank.
Any advice?
Thanks
Donna,
Any HARP lender SHOULD be able to do your loan. It’s a lenders choice if they don’t want to do a condo.
If you keep your new loan at 95% of your new value after you roll in closing costs, you will get the most ideal HARP pricing.
Feel free to contact me. I can give you some tips on finding a good HARP lender if you wish.
Keane
Hello,
My current (only 1st mortgage) loan is with CITI and it is a Freddie loan. CITI would not re-fi under the HARP 125% LTV program due to some technical issues.
I found a local Credit Union that said they could do my loan as an ‘OPEN ACCESS’ with upto 125% LTV. Everything was progressing till today when my current Insurer said that for OPEN ACCESS they (MGIC) support only 105% LTV… IF it is the same servicer then MGIC would write Loan upto 125% LTV. I am currently at avery high interest rate (7.5%) Please help,
Regards, – MS
MS,
I think you’re getting false information. If the loan has mortgage insurance, you MUST go through your servicer. Nobody can do a HARP refinance with mortgage insurance on the current loan other than the current servicer, unless they’ve recently changed the guidelines.
“Open Access” IS a HARP refinance. All Fannie Mae HARP refinances are called “DU Refi Plus” and all Freddie Mac HARP refinances are called “Open Access”.
If your loan has mortgage insurance and is with Freddie Mac, you can only get a HARP refinance from Citi.
I have 3 Wamu/Chase loans, two rentals one primary.two are fannie(option and 5/1 arms) one freddie(5/1 arm) all at or under 95 ltv. I am told by Chase that due to my original loan being a low doc stated type that it does not qualify for Harp. I have spoken with 4 chase agents and they either say no qual or not eligible for streamline(basically a nice way of saying no qual. I can’t find anyone that is discussing this aspect. I have perfect credit no pmi and meet every criteria. Also I have a second that did not show up on title when I did a refi and pulled $100,000 out. It shows on credit file but not in title. If I can’t refi and loose the house would the second be the legal first?
Andreas,
It may be an internal thing as to why Chase won’t do it.
Did you check any other HARP lenders? The “no PMI” means anybody can try.
If the 2nd was never recorded to title, then it’s unsecured. I would check your county public records to see if it was recorded.
The non-owner options for a Freddie Mac Open Access look pretty good with the right lender.
What’s the terms of your loans now?
Keane
Keane,
Thanks for the informative info on HARP. I have been solicited by my lender to refinance under HARP. It is for an investment property (single family home) for which I have 80-90% LTV. Some sources seem to suggest that HARP refinance is only available for owner-occupied properties. Do investment properties qualify?
Dan,
Investment properties DO qualify. I priced a 30 year fixed at 5.5% on a non-owner property at 100% of the property value two days ago. It was a Freddie Mac loan. I was very impressed with the pricing.
Did some more reseach on the Fannie Mae Harp refi with Chase, including talking to Fannie Mae directly. It appears that Chase and other lenders are qualifing borrowers with their own underwriting criteria, not directly related to Fannie Mae guidance(DU Refi qualifing program)and if the loan you are trying to refi was originally a low dac/stated loan these lenders will require full doc even though fannie would refi it with their streamlined system, that system often does not require an appraisal or more than verbal proof of income. So I am of the understanding that going with another lender other than the servicer would be prudent due to the new lender not having the original loan criteria in there system. The ironic thing is, should Fannie kick it out for manual underwiting they would require you to go through the original servicer (another fee and credit check). How about a public option for doing refi’s where lenders don’t make 8-$16,000 for selling fannie or freddie a loan they already have on there books and can be streamlined in their “DU REFI” program in 15 minutes with a $75 no apprasial fee. I have an an underwater 6.5 5/1 set to reset in year, never missed a payment and a 750+ FICO. So at this point Chase as the servicer and seller of the original loan to fannie (do they have any fuducary responsibility to fannie/Taxpayer?) would rather me default (in my best interest Moral hazard aside) costing Fannie $100,000 plus and making Chase a good chunk charging Fannie/Taxpayer for servicing the forclosure process. I have heard(lind-waldock)that for the responsable hard working self employed risk taking American that is being hung out to try in all this, could take matters into their on hands by selling Eurobond futures contracts (3 month Libor) on the CME, that if done right would lock in their current Libor .75 + Margin (2.1 margin in my case) for a effective fixed interest only of %3.85 for 25 years. Tell me I am missing somthing please as I am clearly going insane.
andreas,
Yes, many HARP lenders will crucify you if you did your previous loan low-no doc. All VERY good points. When we run the file through Fannie Mae’s system, it just checks to see if it’s a Fannie Mae loan and we follow the guide on what’s needed. It sounds like the original servicers are actually making it harder on their existing clients.
Yes, the system is designed to make the new lender money but they do have skin in the same. Loan defaults, they share the loss. That’s why many lenders won’t go to 125% when the guide allows them too. The last time I checked, the lender has up to 6 months post closing where they can buy back the loan. That’s a long time to wait to see if a homeowner will default on a 125% loan.
You lost me on your 3.85% theory…LOL. I’m not sure sure how selling Eurobond futures is going to lock the Libor at .75% for 25 years. I think your rate would be 2.85% if it did work. Tell more so know what you’re talking about, but at this moment, I’m not getting it.
Keane,
Great site and service you have here. Here’s our situation. Our primary mortgage (no second) has an outstanding bal of $194,000; we recently had it appraised for $162,000 which put the LTV ~121%. Our monthly payment is $1,350 and there’s no mortgage insurance on this loan. We originally refi it in 2008 with a broker with Bears & Sterns as lender. It was subsequently purchased and is now serviced by Chase. The loan is guaranteed by Fannie Mae (I checked).
We are current with payments and really are not in hardship. We’re trying to decide on whether to sell our current home, rent it, or stay. We probably don’t qualify for short sale. We don’t qualify for the HAMP.
The only other option is the HARP. I’ve been reading and researching this but still have additional questions:
1. By all accounts we qualify for HARP. I approached Chase and one rep said I didn’t qualify because the loan didn’t originate with them but through a broker. He said it was a limitation set by Fannie Mae. I took his word but did further research and could not find any such restriction from FM. Is this just Chase’s way of not wanting to do a HARP Refi at LTV of 121%? It’s sounds more like of a internal Chase restriction than a govt. Pardon my laymen understanding but is this similar to what Chase told Andreas in above post?
2. If I can refi with someone else than Chase, I will. Our current interst rate is a decent 5.75% 30yr fixed. I’m not sure we can get any better than that rate when factors such as LTV @121%, credit score (my spouse is 800 but I have a bk in 2001), and points/fees comes into play.
3. Under HARP, can you go from a fixed to ARM? Will any lender do an ARM with LTV 121%? I’m assuming no but…
4. What about FHA for our situation?
We’re kind of stuck in the middle where we really don’t qualify for anything. We’re leaning towards just renting the house, take some monthly loss, and maybe break even in 2, 3, 5yrs?
Thanks for any insights you have.
Bad math %2.85 I am already starting to feel better. This is the link to the arm lock theory http://www.lind-waldock.com/education/ewire/archives/705/feature01.shtml. Any extra research by Joe six pack on this would be helpful. I didn’t realise the lender still has liability after selling to Fannie,Freddie or Joe. Perhaps Uncle Sam should should take that liability, that’s what Joe was made to believe in the rolling out the plan speeches. I wonder how it would come off if Obama said we are rolling out these plans, but we have to first get permission from the good folks at Chase, Citi et al. So now the question is what lender is relying on the Fannie and Freddie rules primarily and only charging $4000 over wholesale for the privilege.
KV,
FHA is out of the question for you. FHA is great for people who have two loans over 100% but the first is under 97.75%.
Chase’s decision to NOT do the refinance is purely based on their own overlaying risk guidelines.
You’re correct in that you do qualify. You just need to find a Fannie HARP lender in your area who can finance up to 125%.
Your rate is pretty good considering your value and that you don’t have mortgage insurance. You CAN go to an adjustable rate option, but no interest-only. I just priced a Fannie Mae HARP 7/1 ARM for someone today.
Hi Kevin,
I am looking to refi an adjustable mortgage into a fixed. I have contacted one lender and it looks like I can do a conventional loan–credit score is no problem, and the loan is for $130K (no cash out)–I don’t know the appraisal on the home but zillow lists it at $300K but I think that is inflated–probably value is low to mid 200s. I have a Fannie Mae loan w/ Chase and there is no Mortgage Insurance on it.
Then I found info on Fannie Mae and HARP. Should I do a conventional refi or should I contact Chase and ask them about HARP. Are the interest rates the same? I am wondering if I will have to pay fees w/ HARP or do they waive them? THanks.
On the off note–a question unrelated to HARP–can I go to a different lender? I went in to meet w/ a lender, brought all my documents, was approved, signed several docs (work verification, letting them pull credit etc . . .) (but I did not sign final loan docs) and locked into a 5.00% rate. I was asked if I wanted to lock in at that rate and I agreed.
I found out a few days later they thought they had locked me in (it was close to 4:00pm) but turns out the rate was not locked and now has risen. I was asked if I wanted to lock in the higher rate, but I missed the 4:00 deadline to do so today. I am wondering if I should go to another lender or if this is a common error.
Finally, just want to add the home is my only home, I live in it and it is a home, not condo. Not sure if that makes a difference w/ HARP.
My primary home is financed by 2 loans which are both Fannie Mae. The combined amounts of the 2 loans easily meets the LTV of 95-100% for a declining market. No PMI (original financing was 80/15). Chevy Chase representative in the refinance department is trying to tell me that they do not do HARP refinancing. IS a loan servicer able to refuse to follow HARP guidlines when they do not own the loan? She is also trying to tell me that I wouldn’t benefit from it anyway. However, with FHA refinance I would have to have the home appraised and doubt I would have 80%LTV to avoid PMI. I want to consolidate the 2 loans I have and acquire a lower interest rate.
Dan,
How did you verify that both loans are owned by Fannie Mae? Were they both used to purchase the home? It’s very rare to find a 2nd mortgage owned by Fannie Mae or Freddie Mac.
HARP refinances are not required by the current servicer. In fact, some servicing companies do not do loan originations at all. Your loan does not have PMI, so you don’t have to go to your servicer. Just find someone who specializes in this form of refinancing and let them do it. The current servicer will not have anything special for you anyways. Email me if you want a suggestion for someone in your area.
FHA 30 year loans require Mortgage Insurance regardless of how much equity there is. They do not follow the same guidelines as conventional loans. FHA 15 year loans do not require mortgage insurance if there is at least 10% equity.
If your first and second are both owned by Fannie Mae, then refinancing and paying them both off would likely be beneficial.
This is the most coherent source of information on this subject I have seen in a while!
I am little confused about your post though and whether or not I could possibly refinance with FHA. I have two mortgages totaling $224K ($164K & $60K) on my property. The primary mortgage is a FreddieMac backed mortgage with OneWest/IndyMac Bank. There is no PMI.
I am interested in doing a refi because my primary mortgage is a 5/1ARM that recently started to adjust. I benefited from low rates with this first adjustment and I’m now at 3.125% from 5.875%. However, my rate can adjust every 6 months and I don’t like playing Russion Roulette.
I would estimate that my property is now worth $190K on the low end (due to some neighborhood foreclosures). I *should* qualify for a HARP refinance under the 125% LTV program but OneWest gives me a new story every time I call them. I would love to be able to not deal with them at all.
Is your post saying I could do a 15-year fixed with FHA (no MIP) or a 30-year fixed (with MIP) with FHA? Does this work with my numbers?
Thanks for any assistance!
rebounder111,
FHA is an option but I would not go down that route first.
You only have to go to One West to refinance if your loan has PMI, which it does not. You should be able to do a Freddie Mac HARP refinance with any Freddie Mac lender as long as your second mortgage company will subordinate their loan. I’m doing this now for another client who has a Freddie Mac 1st mortgage with Chase and a 2nd mortgage with Citi.
You also can do FHA. Your understanding is correct. You can do a FHA loan with MIP on a 30 year loan. If you do a FHA 15 year loan and your new loan is at 90% of your current appraised value or less, no MIP is required. FHA loans do not have a combined-loan-to-value limit, so it doesn’t matter what your second goes to. You only must qualify the first mortgage limits.
Long story short, you should be able to do a HARP refinance or a FHA refinance without dealing with One West. A Freddie Mac HARP lender who also offers FHA will be able to give you both options and let you compare the differences.
Very helpful info, thank you.
I’m have a townhouse in CA, and am underwater. I’ve been trying to work with quicken on getting my 1st (BofA/Fannie Mae) rolled over to HARP under the 125%, but they seemed inclined to do 125% with first and equity line (WFB) combined. Credit score above 800, no significant debt, but having trouble finding someone to do the lending on a first at 125%. Still in fixed ARM now, it will readjust in 2 yrs, but I don’t think the value of my place will recover in that time. Appreciate any suggestions, thank you.
Michaela,
There’s a really good chance that your home equity line is not a Fannie Mae or Freddie Mac loan. In fact, it’s almost impossible. It’s more likely that your only option is to do the first mortgage and keep the second mortgage the way it is.
Did they tell you this?
Keane
I’d be totally fine if they were to leave the equity line alone. But the problem is when they add the equity line, I no longer meet the 125% HARP range. And they are saying that they look at both to determine the percentage…and asking me to pay 60K to meet that range. I’d be happy to pay 30K to meet the 125%range on the first, but so far, they’re not agreeing with me, but another 30 K on equity line isn’t feasible.
Michaela,
This is where these loans get confusing.
HARP’s 125% limit is for the FIRST MORTGAGE ONLY. There is no limit to what the two loans are combined.
However, that does not mean a lender has to go to that limit. They can overlay their own guidelines to protect themselves.
How much is your first mortgage alone?
Appraised at 270K, and first is at $360K. Website says they do 125% financing, but I guess they don’t specify if that’s for first and equity. I have adequate funds to get my first to 125%, but need to find a lender who’s willing to do that with me…
Michaela,
Technically, you fit the guidelines. You’re refinance would be pushing HARP guidelines to the very limits, but you do qualify.
Have you only talked to Bank of America?
Yes, BofA only goes to 105%. So I tried working with quicken loans, but current roadblock as described above.
Keane — so happy to find your helpful site! 2 questions: (1) If it’s true, on what date did HARP relax income requirements for homeowners having a loan to value under 75%? (2) Is there recourse for home owners who missed out on lower interest rates due to misinformation and/or delays by their bank? In 2009, I pursued every option available to modify or refinance in order to reduce monthly payments. My income had dropped drastically so I did not meet requirements to refinance. But no one could tell me why the modification was denied. I called Chase again in March of 2010 and was told that I do qualify for HARP. After one year of red tape and wasted fees, I didn’t trust the Chase Representative. I asked important questions, but by the time they researched and got back to me, interest rates had risen again. Different Reps gave me different answers so I was concerned. In addition, my Chase Rep dropped the ball, causing me to lose another quarter point. On 3/31/10, I finally trusted Chase and was 99% ready to go, but waiting for one final question to be answered. The Rep did not get back to me until 4/1/10. He had assumed that the rates would remain the same on Good Friday because the markets would be closed. As you know, the bond market was open and rates went up again. I know it was only a slight increase this time, but I am already short each month and even an extra $25 to $50 each month would hit me hard. And as the rates increase, the HARP fees and costs rise. And obviously, it would have helped me even more to have qualified when rates were below 5% and I could have saved $100 to $200 per month. Now, I have no idea what rate I’ll be able to get on Monday 4/5/10.
Sheri,
I’m sorry to hear about how your loan was handled. Remember that you do NOT need to use your existing servicer unless your loan has mortgage insurance. Most of the large banks are not doing a very good job handling HARP refinances.
As for your questions, I’m not sure if there was a date where HARP income guidelines were more relaxed, but you typically don’t need a HARP refinance if your loan was at 75% of your value or less.
Unfortunately, I do not know of any recourse. Remember that HARP is a true, voluntary refinance program. You should be able to lock your rate just like any other refinance. I don’t know why this option has not been made available to you, but it should have.
Thanks Keane —
(1) Can you recommend other servicers you trust in Chicago? Since my loan does not have mortgage insurance.
(2) Yes, my loan to value is at 75% or less so I typically wouldn’t need HARP. But I don’t have the income to qualify for other refinancing options (unless you can suggest some I haven’t looked at). If HARP isn’t the right program, then what is the right program for those who want to refinance but have lost jobs or lowered income?
(3) Is HARP a truly voluntary program on the part of the Servicer, meaning they don’t have to do it just because the home owner qualifies and wants to do it?
This is a great website for information. Here is my situation.
I have a combined 1st and 2nd of $211,500.00, 1st ($188,500)is with GMAC (fanniemae) and 2nd ($23K) is Citimortgage. My home appraised for $206,000.00 in October, 2009.
I have a credit score of about 630 due to an investment property going delinquent, which now shows a late on the payment on the investment property. The investment property has since been sold in 09/09 and the mortgages associated with that property are now paid in full.
My current mortgages have never had any lates or delinquencies on them and this is the only property I now own and is an owner occupied primary residence.
The problem I seem to be running into is that for the HARP program I have a late on my credit, and the guidelines say “no lates within the last 12 months on the mortgage”, does that mean on the mortgage that is being refinanced or “any” mortgages in general? I can’t get a clarification on that point.
The other option is FHA, but what is the FHA requirements on mortgage lates?
Thoughts please? I am paying 6.5 on my 1st and 8.4 on my 2nd.
Also looks like there may be options to go 105% is that to combine the loans?
Cynthia,
HARP loans are only for Fannie Mae and Freddie Mac loans. Second mortgages are very rarely owned by either of those two entities, so you probably cannot combine them.
FHA allows you to go to 97.15-97.75% of your FIRST mortgage and no limit on the second, so that would be an option. They are also more flexible with mortgage lates. Lastly, your score is high enough to do a FHA loan. This appears to be your best option.
Keane
I keep hearing that you can Harp refi with another lender, but my understanding is that will only work if the new lender can process it under Fannie/Freddie? streamlined du-refi. If that system asks for additional information a new lender can’t do the loan, and you could be out time, fico points and app fee if they are sneeky (not likely lol). I have been reluctant to try this route and am waiting until Chase starts applying harp to their Wamu stated loans. Any knowledge on this would be helpful.
Andreas,
The system will not request any more items than what Chase will require.
I’m not trying to be bias, but in all honesty, the only reason you would stick with Chase is because you have PMI. It’s more important that your loan officer be an expert at HARP refinances. The items requested for a HARP refinance are the same for any lender. HARP refinances ONLY work with Fannie and Freddie loans. If your WAMU loan was not a Fannie/ Freddie loan, they cannot refinance it as a HARP refinance.
A lender cannot collect fees from you to take an application. It’s against new regulation Z laws. At the most, you will be out a credit report fee which ranges from 10-25 dollars.
If you give yourself only one option, you are shorting yourself the possibility of working with a lender who’s more knowledgeable and will give you a better deal. As difficult as these loans can be, they are still regular refinances. Either the loan officer you’re working with knows what they’re doing or they don’t.
Hello Keane,
Just a word of caution. I agree with all you had to say with respect to HARP. I am victim of HARP trying to re-fi for the last 6 months or so but still struggling…. As a result this is the 3rd time my app is being processed 1st with CITI (same lender) then with a Cred Union (Open access) and now again with CITI (since I had PMI)…. All these 3 times in the last 6 months they asked for an appraisal and I had to pay for them from my pocket – so apart from the Credit check fee (which was $15 a POP) I incurred appraisal fee from my pocket and still waiting with Uncertainty…. I am not disouraging anyone but like Keane said you need to land up with the right loan officer (with HARP knowledge) which is never under anyone’s control….
– MS