HARP Program FAQ
Why are these changes being implemented now?
The FHFA, Fannie Mae, and Freddie Mac have been working with the mortgage industry to create a plan that would boost the number of homeowners who qualify for refinancing through the HARP program. The new changes to HARP program will take advantage of today’s historically low interest rates and, by spreading the opportunity to refinance, provide benefits to homeowners, housing markets, taxpayers and government enterprises alike.
Who is eligible for refinance under this enhanced program?
Borrowers who fulfill the following criteria will, in general, qualify for HARP:
- they must be current on their mortgages and have no record of late payment within the last six months, and may only have had one late payment maximum over the past 12-month period.
- the current loan-to-value ratio (LTV) must be higher than 80%.
- the mortgage must have been sold to or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009
- the mortgage must not have already been refinanced through HARP in the past, unless it happens to be a Fannie Mae loan that underwent a HARP refinance between March and May 2009.
How many borrowers will qualify for the HARP program with these changes?
No estimates can be certain since the number of refinances will be affected by the number of lenders and servicers who choose to participate, the number of borrowers who will elect to apply for a refinance, and how much or little interest rates will rise in the future. However, the best estimate according to current market interest rates is that the number of HARP refinances may double before the end of 2013 when the program is set to terminate.
With that in mind, it must be stressed that this program is not open to all borrowers and cannot save all underwater home loans. It is only open to borrowers who have Fannie and Freddie loans who meet the above requirements.
What steps should I take to receive benefits from HARP?
First, make sure that your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac. You can do this by visiting each of their websites and using the web tools designed for this purpose or click here. Once you’ve confirmed, get in touch with your present lender or find another lender that is participating in HARP.
Are the companies who promise to help borrowers obtain HARP loans authentic?
To apply for a HARP loan, it is not necessary to use a third-party company that calls itself a “foreclosure specialist” or “mortgage expert.” Borrowers should talk to their lenders first before contacting third parties.
What is the maximum loan-to-value (LTV) ratio allowed under HARP?
The maximum LTV rule has been changed: if the borrower refinances into a fixed-rate mortgage, no LTV limit applies. However, if the new loan is an adjustable-rate mortgage, the borrower’s LTV cannot exceed 105%.
Is HARP the only refinance option that borrowers are able to use?
No. HARP is actually one of several options available for a refinance: Fannie Mae and Freddie Mac have already helped nine million homeowners to refinance into more affordable mortgages since April 2009. What makes HARP unique is that it gives borrowers with low home equity access to lower interest rates and other benefits.
Do mortgages on condominiums qualify for refinance under HARP?
Yes, condominiums already qualify for HARP loans and will continue to qualify under the enhanced program as long as they meet the original requirements by Fannie and Freddie.
Are appraisals required for all refinances?
An appraisal is not required when there is a reliable automated valuation model (AVM) value estimate on a property. If there is no reliable AVM estimate available, a new appraisal is necessary.
When will these HARP 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.
Will there be additional risk from the elimination of seller and servicer representations and warrants on HARP loans?
If anything, the changes being made to enhance HARP should reduce the credit risk for the participating government enterprises (Fannie and Freddie) and stabilize the mortgage markets while lowering the risk of foreclosure. Almost all borrowers who apply for a HARP loan have proven records of paying their mortgages for at least three years, which shows their ability to fulfill their mortgage obligations while home prices have taken a downturn.
As representations and warrants protect the enterprises against losses on bad loans, defects on those loans usually appear at the beginning of the mortgage and cause the reps and warrants to lose their value over the long term. Under HARP, however, eligible borrowers will be strengthening their household balance sheets and lowering their credit risks to Fannie and Freddie. For this reason, the FHFA believes that the elimination of reps and warrants will encourage more lenders to participate in HARP and provide more borrowers with refinance opportunities.
Why encourage borrowers to shorten their mortgages?
For borrowers with little or no equity on their homes, there are few financing options available until the balance on the mortgage is paid down. Having a shorter-term mortgage enables borrowers to pay down their balances much quicker than having a 30-year mortgage. In addition, lower interest rates can allow them to shorten the payment term without taking on an increase in the monthly payment amount. The outcome is a win-win situation: the borrower achieves stronger financial conditions and the enterprise that is backing the loan assumes a smaller credit risk.
Let’s look at the following scenario to illustrate how a HARP refinance works.
Nancy’s mortgage amount owed: $200,000
Interest rate on the mortgage: 6.5%
Nancy’s monthly payment: $1,264
Nancy’s home value: $160,000
In this example, Nancy needs to pay $40,000 to pay down her loan balance, and her current loan-to-value ratio is 125%.
Nancy could refinance her mortgage into a fixed-rate, 30-year mortgage with a 4.5% interest rate. Her monthly payment would fall from $1,264 to $1,013 as a result. However, her loan balance still would not fall under $160,000 for ten whole years.
She could also choose a 20-year loan term at a 4.25% interest rate (as shorter-term mortgages usually have lower rates). In this scenario, Nancy would have $1,238 as her monthly payment ($26 less than her current payment) and she would reach $160,000 in five and a half years.
If Nancy chooses to refinance into a 15-year mortgage at a rate of 3.75%, her monthly payment would increase to $1,454, a difference of $190 per month. However, the balance on her loan would fall below $160,000 in just over three and a half years.
This example shows how some borrowers who are eligible for HARP may benefit from shorter-term mortgages. That said, each borrower’s case is different, and the interest rates they pay will not necessary match up at these levels. A shorter-term mortgage lowers credit risks because the mortgage principal is repaid faster. Thus, borrowers will not face additional fees if they opt for shorter terms.
What costs can I expect with the HARP 2.0 Program?
Can I get cash back on a HARP 2.0 Refinance?
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.
Why are LLPAs required?
Although Fannie Mae already owns the risk on the existing loan, the new loan will bring with it additional costs, including the mandated holding of capital against the loan based on current risk. LLPAs, therefore, are necessary to cover these requirements.
What LLPAs apply?
Effective January 2012, Fannie Mae will be reducing the amount of loan-level price adjustments (LLPAs) applicable to HARP mortgages. Delivery fees will be eliminated for HARP mortgages whose amortization period is 20 years or less, and for those longer than 20 years, the adverse market delivery charge (AMDC) will be lowered to 0.75%. Also, refinances with higher LTVs will now be allowed. Standard risk-based LLPAs do not apply to Refi Plus loans.
For more information on these changes, refer to Fannie Mae's updated Refi Plus Pricing Matrix.
How does Fannie Mae Refi Plus Pricing vary for HARP?
HARP loans being refinanced under Refi Plus now have their own Pricing Matrix that has been developed by Fannie Mae. The Pricing Matrix came about due to increased flexibilities in MI coverage, and greater LTV and CLTV ratios in addition to other qualifying criteria. Fannie Mae's updated Refi Plus Pricing Matrix at eFannieMae.com.
Does AMDC apply to refinances?
The Adverse Market Delivery Charge (AMDC) only applies to non-HARP loans under Refi Plus (manual or DU) and to those HARP loans lasting longer than 20 years. The standard AMDC is 0.25%.
Can my Mortgage Insurance company charge me a fee?
MI companies may charge modification fees for the transfer of MI certificates, and these fees can be rolled into the new loan's unpaid balance. Fannie Mae requests that such costs should be reasonable and that the new loan will continue to meet all guidelines issued by Fannie Mae and the MI company.
If I pay some fees out of pocket can I get reimbursed for them?
Yes, as long as the lender documents that you have paid the fees from your own pocket, the refund on those fees can be rolled into the loan amount and will not count toward the cash back limit.
Is my current mortgage eligible for the HARP refinance program?
If I refinanced on or after June 1, 2009 am I eligible for HARP 2.0?
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.
If I am currently in a modification program can I apply 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.
My home is currently listed for sale. Can I still apply for HARP?
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).
Can I combine my second mortgage into the refinance?
No, the second mortgage may not be combined with the first mortgage into the new refinance. No HARP refinance may include a cash-out component, except for closing costs and allowances on certain amounts such as insurance costs, property tax bills and association fees.
Is a loan in an inter vivos revocable trust eligible?
Yes, if the existing loan was originally closed in the borrowers' names and was then transferred to an inter vivos (i.e. living) revocable trust, the loan is still Refi Plus-eligible. The only allowed parties to the trust are the borrowers on the existing loan. See Fannie Mae's guidelines to make sure the trust abides by all standard requirements.
Can I resubordinate my second mortgage?
Yes. Resubordination can be done as part of a DU Refi Plus transaction, as long as it is not used to pay off the second loan or acquire new subordinate financing.
Should I use HARP 2.0 or HAMP?
The Home Affordable Refinance Program (HARP) is intended for those homeowners whose homes have lost value, and therefore have not been able to refinance at low mortgage rates. On the other hand, the Home Affordable Modification Program (HAMP) targets borrowers who are in default or dangerously close to defaulting by helping them to avoid foreclosure.
To be eligible for a HARP refinance under Refi Plus, the borrower must:
- demonstrate an ability to meet their monthly loan payments and be current on the existing mortgage
- have no record of delinquency over the last six months, and no more than one 30-day delinquency over the last 12-month period.
Do all existing borrowers need to be on the new loan?
Existing borrowers may be removed from the new loan on a Refi Plus transaction, for any reason, as long as the following conditions are met:
- the lender can demonstrate that the borrowers who remain on the loan have made loan payments over the past 12 months from their own funds; and
- the borrower to be removed from the loan is also removed from the deed.
What types of loan does a HARP refinance allow me to get?
A HARP refinance allows you to readjust your loan to a more stable product. The following examples demonstrate some of the most common refinance transactions under HARP:
- Refinancing a mortgage loan that includes an interest-only provision into a fully amortizing mortgage (that is, a mortgage that includes amortization of principal as well as equity accumulation)
- Refinancing an adjustable-rate mortgage (ARM) into a fixed-rate mortgage (FRM), and thus preventing the possibility of payment shock
- Refinancing an existing ARM into a new ARM that has a fixed introductory period that lasts five years or longer and is no less than than that of the existing mortgage, thus preventing the oncoming payment shock and extending the initial rate period
- Refinancing a 30-year FRM into a new FRM with a shorter term, such as 25, 20 or 15 years (to build equity and allow for quicker amortization of principal).
Do high-cost area loans and jumbo loans qualify?
Yes, mortgages in high-cost areas and jumbo mortgages do qualify for Refi Plus refinance. These loans can be delivered through a high-balance loan option. All current loan limits apply. The "permanent" limits on high-balance loans apply to any Refi Plus loan whose note is dated October 1, 2011 or later (as the "temporary" limits on these loans expired on September 30).
What if I have a subprime or Alt-A loan?
An existing subprime or Alt-A loan that is backed by Fannie Mae can qualify for refinance through DU Refi Plus, but not through Refi Plus manual underwriting. Your may wish to contact lender to have them provide you with other refinance options if your loan is a subprime or Alt-A loan and thus does not qualify through Refi Plus.
Do I have to use my current lender with HARP 2.0?
If you are applying for a DU Refi Plus loan (HARP 2.0), you may choose any lender you wish or select the existing servicer to originate it. (This flexibility is due to the fact that DU automatically determines if the investor on the existing loan is Fannie Mae, even if you don't use your current lender.) On the other hand, manually underwritten Refi Plus loans have more limits and can only be originated by the server of the existing loan.
How does my lender calculate payment increases on an ARM or pick a payment loan?
If the ARM is in its initial-rate period, the lender will compare the new principal and interest with the ARM's initial rate. However, if the ARM is in its adjusted-rate period, then the lender will compare them using that adjusted rate.
If the loan comes with multiple payment options (such as negative amortization), the seller should go by the lowest payment option in order to see if the increase will be greater than 20%.
Are balloon loans and ARMs eligible?
Balloon loans and adjustable-rate mortgages (ARMs) that have a convertibility option are eligible for refinance under DU Refi Plus and Refi Plus, but only if they meet one of the following conditions:
- the borrower has not elected to make a conditional right to refinance in the case of a balloon loan, nor exercised the conversion option in the case of an ARM; or
- the borrower has elected the conditional right to refinance or the conversion option, and had the loan redelivered to Fannie Mae before June 1, 2009.
What if my mortgage is not with Fannie Mae or Freddie Mac?
If your loan is not held by either Fannie Mae or Freddie Mac there may be other programs still available to you. If you would like to speak with a counselor about available programs, call the Homeowner’s HOPE Hotline 1-888-995-HOPE (4673). The Homeowner’s HOPE Hotline offers free HUD-certified counseling services and is available 24/7 in English and Spanish. Other languages are available by appointment.
Can I use the HARP program if I currently have mortgage insurance?
What are the MI Requirements for HARP 2.0?
MI coverage is only required for DU Refi Plus loans with a loan-to-value ratio higher than 80%. The lender may obtain standard MI coverage or the amount of MI coverage on the existing loan. However, if the MI on the existing loan was previously canceled or terminated, a new MI policy is not required for HARP 2.0 financing.
How does MI flexibility work with HARP?
The Fannie Mae Charter permits some flexibilities in refinancing for Fannie Mae-backed loans due to unique circumstances in the housing market. This includes flexibility concerning the credit enhancement requirements for LTVs greater than 80%. However, the MI flexibilities are bound by specific time and eligibility restrictions.
How is my new MI calculated?
The end date or cancellation date for the new MI should be calculated using the terms of the note for the new loan, including the new unpaid balance, loan-to-value ratio and life of the loan. To ensure that a reasonable date of coverage is calculated, have your lender contact their MI provider.
Do I have to use my same MI company?
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.
Can my lender pay my MI?
Yes. For any Refi Plus transaction, the new loan may have either new or existing MI coverage paid by the lender.
What if my loan has lender-paid MI?
Your loan is eligible for refinancing under Refi Plus (manual underwriting) as long as you are retaining the same servicer for the new loan. The continuation of MI coverage is the responsibility of the servicer.
If your loan was acquired by Fannie Mae earlier than June 1, 2009, it is eligible for refinancing under DU Refi Plus. If the loan is being refinanced with a different servicer, the lender will be responsible for providing MI coverage at the same level as the existing mortgage.
What if my MI company is no longer issuing new policies?
Your loan is still eligible for refinance. Although some MI companies are currently not allowed to issue any new policies, they are still allowed to modify terms of existing loans, so long as they:
- benefit the position of the borrower
- comply with their published guidelines
- lower the risk of default and therefore the risk of the MI company's payment of a claim. (Any claim that is unpaid by the MI company, due to a financial inability to pay, will become the risk and responsibility of Fannie Mae, not the lender.)
What if I had financed MI?
If your existing loan includes financed MI, it is still eligible for refinancing under Refi Plus; the MI coverage will continue on the refinanced loan in the same way as it would for an existing loan without financed MI. Also, it doesn't matter if the financed premium was paid as a single or as a split premium, as this does not affect the continuation of coverage.
What terms of Mortgage Insurance do I need?
The terms of the Mortgage Insurance should last the full life of the new mortgage, or until the MI coverage is canceled in accordance with legal rules and guidelines. Therefore, if an existing 15-year loan gets refinanced into a new 30-year loan, the MI should be effective for the full 30-year period.
Can my Mortgage Insurance company charge me a fee?
MI companies may charge modification fees for the transfer of MI certificates, and these fees can be rolled into the new loan's unpaid balance. Fannie Mae requests that such costs should be reasonable and that the new loan will continue to meet all guidelines issued by Fannie Mae and the MI company.
Will an MI company work with HARP 2.0?
Mortgage insurers are more than willing to allow for HARP refinances on loans that they insure. MI companies are aware of the repayment crisis that many homeowners are facing, and will provide the resources to allow them to refinance and stabilize their mortgages. Fannie Mae has been collaborating with the MIs to modify existing MI certificates so that loans with MI coverage can be easily refinanced.
Are there new property requirements for HARP 2.0?
Will my condo or coop have to be re-certified?
Yes, recertification of a condominium or cooperative for insurance coverage is required. Even though the lender is not required to perform a new review of the property for compliance purposes, the lender is required to confirm the existence of proper flood, hazard, liability and fidelity insurance on the property. The lender must also confirm that the condo or coop is not a hotel or part of a hotel/motel unit.
Are there occupancy requirements?
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.
Am I eligible for a HARP refinance?
Do assets and cash reserves need to be included on my application?
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.
Can a co-borrower switch mortgages?
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.
Are there employment / income requirements?
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.
How does my credit history affect my approval?
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.
If I refinanced on or after June 1, 2009 am I eligible for HARP 2.0?
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.
Can I get cash back on a HARP 2.0 Refinance?
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.
If I am currently in a modification program can I apply 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.
What is the maximum LTV, CLTV, HCLTV, or TLTV? And what do all these mean?
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.
What documentation is required to document income?
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.
My home is currently listed for sale. Can I still apply for HARP?
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).
How are joint bank accounts handled when removing a borrower?
When a borrower is to be removed from the new loan through a refinance transaction, the borrower who remains on the loan is required to show evidence that he or she has made payments over the last 12 months from his or her own funds. Therefore, accounts that are jointly held by the removed and the remaining borrower cannot be used to fulfill this requirement. The removal of a borrower is supposed to give the remaining borrower the ability to refinance without the removed party's continued contribution towards the payment of the loan.
When does the HARP Mortgage Program end?
Lenders must deliver Refi Plus and DU Refi Plus loans to Fannie Mae by December 31, 2013. The program is effective for whole loans until April 30, 2014, and for loans in mortgage-backed security (MBS) pools until April 1, 2014.
What if I have a second mortgage?
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.
If the new payment amount is 20% greater, what are the additional requirements?
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
How do lenders determine what is a “reasonable ability to repay”?
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.
Is there still a 620 credit score requirement?
This requirement is being waived for DU Refi Plus loans because Fannie Mae already owns the risk on the loan and the DU risk assessment automatically determines the borrower's ability to repay. At this time, the minimum score of 620 is only required for loans undergoing manual Refi Plus transactions that will result in an increase in payment that is greater than 20%.
Do I need to disclose my income?
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.
What are the credit requirements for the HARP program?
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.
Do all existing borrowers need to be on the new loan?
Existing borrowers may be removed from the new loan on a Refi Plus transaction, for any reason, as long as the following conditions are met:
- the lender can demonstrate that the borrowers who remain on the loan have made loan payments over the past 12 months from their own funds; and
- the borrower to be removed from the loan is also removed from the deed.
What happens if one of the borrowers on the original loan has passed away?
For a refinance transaction, the name of the deceased borrower may be removed from the new loan. However, the name is not required to be removed from the property title. Fannie Mae will go by customary practice for guidance on how to proceed with these situations.
Can a borrower buy out another borrower with loan proceeds?
All borrowers are prohibited from "buying out" the interest of any borrower who is being removed by a Refi Plus or DU Refi Plus transaction, which would thus augment the unpaid principal balance. No increase to the unpaid principal is allowed, unless it is to finance the closing costs.
What borrower benefits are required to be met?
In order to satisfy the borrower benefit requirement for the new mortgage loan, at least one of the four conditions below must be fulfilled:
- lowering of the interest rate
- lowering of the monthly payment of principal and interest
- reducing the period of amortization, or
- moving the loan to a more stable product.
When can I apply for the new HARP program?
Some lenders may be able to accommodate mortgage applications under some of the enhancements by December 1 while it could take other lenders additional time to incorporate the expanded program into their systems. In addition, some of the enhancements such as delivery of loans with LTV greater than 125 should be operational during the first quarter of 2012.
What if my mortgage is not with Fannie Mae or Freddie Mac?
If your loan is not held by either Fannie Mae or Freddie Mac there may be other programs still available to you. If you would like to speak with a counselor about available programs, call the Homeowner’s HOPE Hotline 1-888-995-HOPE (4673). The Homeowner’s HOPE Hotline offers free HUD-certified counseling services and is available 24/7 in English and Spanish. Other languages are available by appointment.
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Comments (48)
john / Im concerned with my inmcoe. I’ve made all my payments and have an 800 credit score. My wife and I are self employed and don’t show allot of inmcoe. Are there provisions inHARP 2 that address this situation?
My loan is not insured by Freddy or Fanny. What other programs can I qualify for.
I was just told by Green Tree that there are no financial institutions in DC that can originate HARP loans. This doesn’t make sense to me. Has anyone gone through HARP in DC?
WE HAD 2nd mortgage on our home can we qualify for HARP
I was not approved for a HARP (1.0) refinance last year because I have PMI, however, all other aspects of my situation meet the standards. Is it possible that I would now qualify under HARP 2.0?
There has to be a way around the ‘joint account’ condition! Why should I have to prove that the last 12 months were from my own funds when the debt/income ratio shows I can clearly cover the mortgage in the future AND why would I pay the other half of a mortgage for the other party that is legally responsible for it?? Has any ever gotten a waiver on this condition??
We are in active bankruptcy, do we still qualify or do we have to wait until we are discharged?
Lucy I have the exact same question. We are in chapter 13 and are coming down the home stretch of ending it. Do we qualify?
I gues no one knows Laura??? Frustrating! I really want to take advantage of this program, but no one seems to be able to answer me, Wells Fargo says NO, but I don’t believe them, I need help! Anyone?
Currently overseas with one more year to go. Home is being rented out and underwater. Can we still “start” an FHA short refi if we plan on returning home next summer?
I would like someone to contact me, I am interested. I have a high interst rate, have been in my home 12 years. Income affected over the last six years, caring for father at home. Help!!!
It’s good to see someone thinking it tohrugh.
I filled for bankruptcy and discharged back in Feb/2011. Never being late with the mortgage payments, before or after the Chapter 7, but my home worth $173K and the mortgage amount is $203K @ 6.75%.
Do the HARP program also benefits people that filled for bankruptcy in the recent past? The M&T Bank (who bought my mortgage from Bank of America) said I couldn’t apply for the HARP 2.0 however I see no info on the matter here.
Can you please help?
Thanks in advance and Merry Christmas,
I filed Chapter 7 May and discharged Sept.2011. My current Mortgage Everhome Bank is doing the HARP program for me and should close next wed.for a 4.125%. Other bank,mortgage said I had to wait 2 years after discharge. Check with your current Loaner and others as all is confusing. Good Luck.
B of A sold my loan to M & T bank 11/11. I am 2yrs since ch 7 discharge and M&T said I can’t get the HARP 2.0 program, wait 3-4 years for refinance. Im not going to give up on my refinance, im going to check with other lenders. I am not happy with M&T bank. I think B of A did this because they knew this would happen!
I totally agree with you. B of A sold mine to M&T Bank as well. I have been up on everything, yet I have a “pool insurance” which disqualifies me from anything. I did go through Quiken Loans and got approved for a 20 yr fixed, have not decided on it yet. I will do it but I was told by M&T to wait a month because Freddie Mac is going to do a waiver or something like that. I don’t know, just keep pecking at it! Good Luck, seriously it will turn out ok!
I paid 265 K for house. I put 30 K down. I now owe 217K. My home is now worth 130 K. My fixed interest rate is 6.35 percent. I am backed through Freddy Mac. I was with BofA and they sold it to Greentree. I pay a PMI and have never had a late payment on the mortgage. Green Tree said I would have to have paid off 20% of loan before I would qualify. She said 80 Grand but that does not come out right anyway….Regardless can I qualify? Does anyone know I keep getting the run around. BofA said they probably could in March and then sold my load to Green Tree and Green Tree says I am out of luck until I pay off more of the loan and the PMI falls off. Any ideas out there?
Mu loan is under Fannie Mae. I am not underwater. Can I still refi with HARP? Thanks
Yes, as long as you meet the additional requirements.
I have a jumbo loan. ($950,000) Will this qualify for HARP?
I was told, due to the fact that my loan will be a stream-line loan, therefore an appraisal would have to b done. Although, my friends mentioned they didn’t have to get their home appraised. Is it a case -to case approach for the Harp program, or is it standard for every applicant?…
We were told today that once the HARP II refinance has been completed, our credit file will take a negative hit, because it will be noted as a loan modification. Is this true? And, is it true that the residence has to be your primary residence?
It is not a modification it is a refinance program “Home Affordable Refinance Program” maybe they meant HAMP.
I owe 153K on a primary loan and 122K on an equity loan. Appraisal around 240K. Payments are two plus years current.
Does the HARP program eliminate the neg equity or just refi’s the whole amount?
appraisel came in last year @305. bal on 1st 369K 2nd 55K is a freddie mac mort great credit & good income can I get harp program ??
Stay away from PNC, we wasted 3 months and $400 on a refi, went to hell and back with all docs, etc and was told we were approved!!! In the 11th hour my credit was pulled for a 3rd time and my score dropped!!!! So, they said my rate would go to 5%!!! Go figure!! We are existing customers with PNC, never late and this is how we were treated!!!
please offer help to us. we have never been late with our mortgage payments . we owe a bout 500k and that is what the house is worth. it is owned by gmac.
why cant we get help from anyone. we just want to refinance from 6.8 to the lowest possible…my husband’s income has been drastically disminished over 3 years. please help us.
I am reading these comments, came across yours. I hope everything turned out ok for you all, no excuse you can’e get help, especially now. GMAC does do the HARP 2.0 if your loan originated from then. Good Luck, I hope you all are well and your Husband’s income jumped back up, along with the refi….you all would JAM!
Hope to qualify for New HARP program after 12 mos. and I’ve paid back default months. I’ve been in my home for 22 years, refinanced without clarity into a pick-a-pay mortgage stuck for 3 years prepay penalty. Lost money as int. rate rose to 9%, frantically, refinanced when losing equity in 2008. Signed Mortgage docs w/o notary, copies obtained from lender in ’09 revealed my signature forged. Principal $347,000 7/1 ARM 5 1/2 %
Value $266,000 Been trying to get bank to give me a new clean loan.
Tried HAMP and was denied. Defaulted for Short sale then New HARP.
I am currently not underwater on my home but have high personal debt, would i qualify for HARP. fico is good
Thanks for your help
You should talk to a loan officer to determine the Debt to Income ratio and what option are available for you.
My loan was with Bank of America and they sold it to Green Tree. They suggest I go back to B of A to do the HARP but since they turned down my modification I prefer not to. Any suggestions?
Try another loan officer.
I know that I qualify for HARP, and my current (as of five years) lender participates. I also had an extensive appraisal. (I haven’t signed any final documents yet.) My question is about fees. My lender is charging $6,750 to generate a $260,000 loan (this does not include other closing costs.) And since they currently own my mortgage, they are at no increased risk. I was told that in the new guidelines there was a change in the fee structure. Where can I get that information? Thanks.
Here are the updated pricing sheets from Fannie & Freddie.
https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrixrefi.pdf
http://www.freddiemac.com/singlefamily/pdf/ex19.pdf
If all HARP 2.0 mortgages are for LTVS above 80% is it safe to say that the HARP program always requires MI?
I currnely don’t have PMI with my current loan. Will chnage with the harp program?
owe 195045
rate 6.375
monthly payment 1291.41
home value 103000
Do I qualify?
Under the new HARP Guidlines there is an unlimited loan-to-value (LTV) ratio. No matter how underwater you are, you can still apply. I am a Home Loan Specialist and I can give you more information and see if I can help you refinance under this program. There are specific qaulifications for HARP and I can check and see if you qaulify.
can we refinance a rental that we once lived in for the new harp loan. we owe 257000 and probably is worth 230-240,000. and do you know what banks are doing the loans.
The new HARP Guidelines are supposed to alleviate LTV requirements.
If not Fannie & Freddie is there any one else to contact? I am not late on any payments.
Our mortgage is thru USAA Bank. Is there any way for us to qualify for HARP or any other mortgage that will allow us to refinance our condo which is worth less than our current mortgage. We fulfill all other requirements.
Thank you for your help.
Even if your mortgage is with USAA it still may be owned by Fannie or Freddie. Check the “Who owns my loan link above”
What events would cause a person who is on the program to no longer be eligible to stay on the program?
Our loan was sold to fannie mae June of 2009, Wells Fargo made promises and drug out the refinance for 90 days when they finally declined the loan. Our credit scores were above 700 and now they have fallen just below 700. The loan Wells Fargo promised time and time again would go thru was a high balance loan originated in August 2011 and was promised it would go thru, Please advise as to this HARP program releasing.
My mortgage amount OWED: $298500.00;
Mortgage rate: 5.5%
Monthly payment: $1892.00;
My home value: #323,500.00
Did I qualify for HARP program?
Yes. Just want to know if I can use the NEW HARP program in my situation. Paid $200K for house in 2007. Owe $150K at 6.35%. When tried to refiance 1 year ago all good until appraisel came in at $150K. Was not able to use HARP back then because of purchase date of my home and would have had to put huge down payment to reduce my rate. Will the new plan allow me to use HARP to reduce my rate to reduce monthly without large down payment?
Thanks for your time