HARP 2.0 Guidelines & changes
No LTV & CLTV Restrictions on Fixed Rate Mortgages: Loans that qualify under HARP no longer have LTV and CLTV restrictions. This means you can be significantly underwater and still refinance if you have or are getting a fixed rate term. ARMs and mortgages with greater than 30 year amortizations are limited to 105% LTV; however, no restrictions on CLTV.
Lower LLPAs: Loan Level Price Adjustments are basically what Fannie Mae & Freddie Mac charge mortgage lenders for making loans to borrowers who aren’t perfect These are being limited to .75 bps which is a significant improvement. What this means in layman terms is that mortgage rates will be more competive for borrowers who may have less than perfect credit scores, higher LTVs, condos, etc.
No LLPAs on 20 Year or Less Amortizations: In order to encourage homeowners to payoff their mortgages, the LLPAs have been entirely removed on shorter amortization loans. This should make shorter amortizations more attractive by allowing borrowers to qualify for lower rates.
No Appraisals: Appraisals will not be required. The government is essentially taking on all of the value risk through this program. If your property value is upside down, NO WORRIES. Plus, you don’t need to pay for the extra cost of an appraisal.
Everyone is approved based on values.
The only issue is if you currently have MI or no MI.
No Income Verification: It looks like there may not be a need for income verification if the borrower has maintained on time payments for at least six months and no more than one thirty day mortgage late in the past year. However, income verification is required if the new principal & interest payment is increasing by more than 20%. This could be a good thing for many borrowers who are self employed or who may not meet current guidelines but are still able to make their mortgage payments.
Bankrutpcy/Foreclosure/Short Sale: The time requirement for each of these has been removed so it seems as if borrowers who may have filed bankruptcy, had a foreclosure or short sale may be eligible.
At the end of the day, it remains to be seen exactly how much this will help current homeowners who want to take advantage of lower rates. There are still some issues with the program that have not been addressed. The first is that the mortgage must have been originated prior to June 2009 which excludes a ton of current homeowners. Removing this hard date would open up the program to recent borrowers as well as those who may have refinanced already; many of which are above current market rates.
Second, HARP remains voluntary so we will see if lenders impose their own “overlays” on the guidelines. Lenders are not required to follow these guidelines to the letter. There are still questions if second mortgage lenders are going to subordinate without an appraisal or an unlimited CLTV. Mortgage insurers will also have to play as well.
The program is available for applications after December 1st, 2011, but only on a limited basis. The LTVs above 125% may have to wait till March 2012. Only certain lenders have LTV’s above 105% available right now.
Some refinances that were previously denied will be approved. We probably won’t see a big surge in refinances from these changes, but we will see an increase in the families that were previously denied to now being approved. This program will not be the magic bullet that saves the housing market. There are still millions of loans that aren’t Fannie and Freddie backed loans that can’t refinance. Until those mortgage are somehow addressed, this will continue to be like putting a bandaid on a gapping wound from a shotgun shot wound in my opinion.
You can see if your loan may be eligible for HARP by clicking on the Fannie Mae or Freddie Mac Loan Up links.
Alternatively, you can just give me a call to see if you qualify.
Ben Gerritsen is a loan officer based in Sandy, Utah. He currently resides in North Ogden, Utah and is a mortgage loan officer for Altius Mortgage Group.
