Assets and cash reserves will generally need to be verified for underwriting purposes. For a DU Refi Plus transaction, lenders are relieved of the underwriting of representations and warranties only if the data entered is wholly accurate and complete, and complies with all instructions detailed in Fannie Mae’s relevant guidelines.

For a manual Refi Plus transaction, assets and cash reserves do not need to be verified unless the new monthly loan payment is an increase of 20% or more over the previous payment. In that case, the borrower must be re-qualified for the new loan. If you are required to bring funds to closing, the assets to close must be verified as part of the re-qualification.

Yes. If one of the original borrowers on the existing loan is removed, a new borrower may be added to the refinanced loan.

However, under a DU transaction, the lender will be unable to represent and warrant that the names on the existing loan match the names on the loan application. Therefore, the lender will need to determine the circumstances concerning the borrower who was removed from the loan:

• If the borrower in question is deceased, the lender is responsible for presenting evidence of the death, but is not obligated to document that the borrower was making loan payments from their own funds over the most recent 12-month period.
• If the borrower is not deceased, documentation of the borrower’s payment history is required, so that it can be shown that they were making loan payments using their own source of funds over the last 12 months.

Note concerning non-occupant co-borrowers:

If the co-borrower being added to the loan is not occupying the property as primary residence, that borrower’s income and debts will not be included when calculating the total expense ratio. Therefore, only the income and debts of the occupant borrower(s) is allowed to be used to determine this ratio.

The lender must verify your employment for a DU Refi Plus transaction, which will require at least a verbal VOE (verification of employment). All sources of any non-employment income that you may have will also need to be documented. Lenders are relieved of the underwriting of representations and warranties only if the data entered is wholly accurate and complete, and complies with all instructions detailed in Fannie Mae’s relevant guidelines.

For a manual Refi Plus loan, the lender needs to verify your employment and any non-employment income sources if your increase in principal and interest payment is less than 20%. A verbal VOE will suffice to determine that you are currently employed. Borrower benefit provisions and your payment history on the existing mortgage will determine your ability to repay the new loan.

If the payment increase is higher than 20%, you will need to be re-qualified for the Refi Plus loan, a process that will require that all sources and amounts of income, as well as any assets to close, be verified.

For a DU Refi Plus loan, your credit risk will be determined through a full review of your credit history. However, Fannie Mae’s required minimum credit score does not apply to this loan.

For a Refi Plus loan (which is manually underwritten), the assessment of your credit depends on how much your monthly payment on principal and interest will increase.

If the increase is less than 20%, the lender is only required to check that a borrower has not been delinquent on the existing mortgage over the last six months, nor has had more than one 30-day delinquency in the six months prior.

If the increase is greater than 20%, the borrower must be re-qualified for the mortgage using a minimum credit score, maximum debt-to-income ratio and documentation of income and assets.

No. If the existing loan was not acquired by Fannie Mae before June 1, 2009, it is ineligible for HARP 2.0. In March 2011, the initial cutoff date of March 1, 2009, was extended by three months to June 1, 2009, and this revised deadline is still in effect.

Fannie Mae policy does not allow borrowers to receive cash back through HARP. However, to simplify calculations when generating the new loan, any amount less than $250 at closing can be returned to the borrower. Any amount higher than this threshold must be applied to payment on the new loan in order to reduce the principal balance. The limit on this payment should be either $2,000 or 2% of the principal balance, whichever is lower. A higher amount would signify a cash-back refinance and thus would not be eligible for HARP.

In general, if you meet the requirements for a modification program such as HAMP, you will not be eligible for HARP 2.0. A modification program is intended for homeowners who cannot meet their current mortgage payments and are at risk of foreclosure. HARP, on the other hand, is intended for homeowners who have not been able to refinance at lower interest rates because of their homes’ falling values.

However, some struggling borrowers may have entered HAMP on a trial basis in anticipation of greater hardship or default. If their circumstances have since improved and the HAMP trial modification was resolved, and they meet the current eligibility requirements, they may be able to refinance through HARP.

A loan-to-value ratio (LTV) is applied to determine appropriate eligibility for finance transactions. While LTV refers to the first mortgage on the home, a combined loan-to-value ratio (CLTV) also includes any subordinate financing on top of the first lien. The terms “home equity combined loan-to-value” (HCLTV) and “total loan-to-value” (TLV) are also used interchangeably with CLTV.

For example: John has a home worth $100,000 and has a first mortgage for $90,000. He also has a home equity loan on which he owes $25,000. Therefore, John’s combined loan-to-value ratio (CLTV) is 115%. If referring to the LTV on his first mortgage, it would be 90%, but in referencing his CLTV (aka HCLTV/TLTV), it is 115%.

While there is no maximum limit on CLTVs for existing loans, no subordinate financing on the new HARP 2.0 loan is allowed, and the existing liens must be resubordinated in order for a Refi Plus transaction (DU or manual) to occur.

While there is no specific requirement for documenting non-employment income, the lender will normally request a common document, such as a bank statement or a check stub, that identifies the source of the income. (The purpose is to confirm only the income’s source, not the amount of the income or its continuity.) Other sources, including capital gains, interest and dividends, and royalties, may come with separate documentation requirements.

Yes. Although Fannie Mae policy prohibits the refinancing of homes that are currently listed on the market, this policy can be waived for Refi Plus transactions (manual or DU).