HARP 3.0 (also known as The Responsible Homeowner Refinancing Act of 2013) has been revised and is being reintroduced to Congress.
The bill is relatively simple but would have a major impact to HARP if passed. The bill proposes simplicity in HARP, changing the guidelines for all lenders to match the guidelines exclusively given to the homeowner’s current loan servicer.
HARP was created with two sets of guidelines for each agency (Fannie Mae and Freddie Mac). One set of guidelines are exclusive to the current servicer/lender and the other is for all lenders. The program exclusive to the current servicer/lender has expanded guidelines which makes it easier for the homeowner to qualify compared to the second program available to the other lenders.
This update would improve HARP and fix several major issues:
- When a company has an exclusive product, they have the ability to charge a premium. For many homeowners, they’ll only qualify on the expanded guidelines offered by the current servicer. This gives the homeowner the ability to shop their loan with multiple lenders and guarantee a fair price quote.
- Lenders are given guidelines by Fannie Mae and Freddie Mac but for their own protection, may set extra guidelines. If a borrower needs the expanded guidelines and the servicer has too many overlays, they may lose their ability to refinance. Opening the guidelines to other lenders allows the homeowner to search for a lender who will provide less overlays and allow the homeowner to refinance.
- SERVICERS WHO ARE NOT LENDERS-
- This is probably the biggest problem that this bill would fix. When HARP was created and the expanded guidelines were offered to the current servicers, the policy makers overlooked the fact that some loan servicers are not mortgage lenders. Loan servicers are not the owners of the loan, they are the debt collectors. Similar to property management for rental properties, property managers have the responsibility of collecting the debt but may not be the owner of the property. Many lenders and banks act as servicers which would allow homeowners to refinance under the expanded guidelines but some companies (such as Seterus, Greentree, Ocwen and Cenlar) do not originate new loans. Homeowners who need the expanded guidelines of HARP to qualify but have their loan serviced by one of these companies are unable to refinance due to a technicality. They do not get to choose who their servicer is. What’s worse is the servicing can typically change at any time, even if the homeowner does not want the change. Many homeowners who waited for HARP 2.0 excitedly contacted the bank/lender who had their loan only to find out the servicing was transferred to another company that was not a lender. For example, Bank of America began transferring many of their mortgages to Greentree in the last couple of years. This business practice has been standardized and isn’t unethical but the guidelines for HARP damaged the homeowners ability to refinance due to this technicality. This isn’t to the fault of Bank of America or Greentree. The new bill, if passed, would fix this problem and allow these homeowners to qualify for refinancing.
Lost in the bill was the ability to refinance HARP loans that have been refinanced before. I will continue to keep everyone updated on any major changes coming down the pike for HARP loans.
Here’s a link to the recent bill changes for HARP 3.0: