When will the HARP 2.0 enhancements be made available?

Each mortgage lender will enact its own schedule for implementing these enhancements. Lenders should receive instructions from Fannie Mae and Freddie Mac before November 15. Several lenders could begin taking in mortgage applications under the new enhancements by December 1. Other lenders will need extra time to accommodate the changes. Enhancements such as the ones affecting delivery of loans with LTVs above 125% should be in effect by the first quarter of 2012.

New LTV requirement need to be built in to Fannie Mae (DU) & Freddie Mac (LP) electronic underwriting systems. This primarily the reason for the delay until March 2012 on the extended LTV’s.

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.

In some cases, borrowers may have taken out second liens on their homes. For a HARP refinance that includes a Refi Plus transaction, any second mortgage must be re-subordinated so that the new first mortgage continues to have first-lien priority. Refer to Fannie Mae’s guidelines to ensure that your subordinate financing is acceptable under Refi Plus transactions.

You must be re-qualified for the new loan under the following guidelines:

• a maximum debt-to-income ratio of 45%
• a minimum representative credit score of 620
• all sources and amounts of income verified
• if required to present funds at closing, have assets to close verified

Note: these guidelines are provided for manual underwriting Refi Plus transactions only, DU Refi Plus transactions will have specific documentation requirements included in the approval results from the automated underwriting system.

Several factors are taken into account when the lender determines the borrower’s eligibility for Refi Plus (manual underwriting).

When the new loan payment amount exceeds the borrower’s stated income, or results in an especially high debt-to-income ratio (DTI), the lender will have to figure out if the borrower does in fact demonstrate a reasonable ability to repay the loan.

First and foremost, they take into account borrower benefit provisions and past payment history on the existing mortgage. As part of this process, the lender will consider if the borrower would be better suited for a loss-mitigation option such as a loan modification or a deed in lieu of foreclosure. For some borrowers, a modification through HAMP may be more appropriate than a refinance, particularly if the borrower is at imminent risk of default.

Remember that, for a Refi Plus (manual) transaction, your DTI and amount of income do not need to be verified if your new loan payment amount is not increasing by more than 20%. However, if you have a DTI ratio that is unrealistically high, the lender will be prompted to review your circumstances to decide if a refinance is a sustainable option for you and for the lender.

Also, although Fannie Mae does not enforce a DTI limit, it does monitor the delivery of loans to develop a greater sense of the tendencies of the average borrower and the lenders’ definitions of what constitutes a reasonable ability to repay the loan.

Yes, you must report your income to Fannie Mae. Even if your Refi Plus loan is not bound by a maximum debt-to-income ratio, you will need to provide your income amount at the time the loan is delivered.

No minimum credit score is required for a Refi Plus transaction resulting in an increase in monthly principal and interest that is less than 20%. However, a credit score is still necessary in order to determine the LLPAs that will be applied to the new loan. If, at the time of delivery of the new loan, a credit score has not been furnished, then the LLPA for the loan will be the highest one listed on the Refi Plus Pricing Matrix according to the applicable loan-to-value ratio.

There is a minimum credit score requirement if the existing loan needs to be re-qualified under Refi Plus — that is, if the principal and interest are set to increase by more than 20%. A credit score of 620 is necessary for re-qualification.

The new loan is not required to represent the same occupancy as the existing loan, since the occupancy status of the property in question may have since changed. Because of this, some properties that wouldn’t comply with the standard guidelines are allowed to be refinanced under Refi Plus; these include investment properties that are cooperatives and manufactured housing, and second homes that are two to four units. Existing restrictions and regulations on property types still apply.

Use this as a general guideline: If the existing mortgage was ineligible before Fannie Mae acquired it, then it does not qualify for Refi Plus; if the mortgage became ineligible after Fannie Mae acquired it, then it does qualify for Refi Plus.

There is no need to retain the same MI company for the new loan. The only requirement is that the lender must insure the new mortgage at the same level of coverage as the existing mortgage. However, a DU Refi Plus loan that does not use the same MI company may have additional restrictions or pricing applied to it.

Yes. For any Refi Plus transaction, the new loan may have either new or existing MI coverage paid by the lender.