HARP Mortgage Requirements
General new Harp mortgage requirements (HARP 2.0)
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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 2.0 program. The new changes to the HARP mortgage 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 the new HARP mortgage requirements?
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 the HARP program in the past, unless it happens to be a Fannie Mae loan that underwent a HARP refinance between March and May 2009.
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 under the new HARP mortgage program requirements 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.
How many borrowers will qualify under the new HARP 2.0 requirements?
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 new Harp mortgage requirements.
What steps should I take to receive benefits from the HARP program?
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 the HARP program?
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. The HARP program 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 with the new Harp mortgage requirements?
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 under the new Harp mortgage requirements?
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.
What costs can I expect with the new Harp mortgage requirements?
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 (56)
Steve
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Merrill Lynch Credit Corp intiated my loan in April of 2007, it was then sold to FannieMae one year later, BofA acquirred Merrill in 2008.
They are saying that I am not eligible for the Harp Program but other Banks say I am. What is the deal with BofA.
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Frank
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My current mortgage is a Balloon loan. I have contacted a few banks to refinance it using HARP (as we are underwater). From what I have read I should be eligible. However, I have been told that my loan is not eligible for HARP since it has not reached its maturity date.
Is this true? Does anyone know if HARP 3.0 will address this issue? I really hate paying an extra $200 a month for nothing.
Thanks for your time.
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Gary Medina
| #
Frank,
Did you ever get the help you needed to refinance under the Harp?
Not sure what you mean by maturity date but the only thing that is needed is that your loan was originated prior to May 31st, 2009.
Can I help you with any other questions or concerns?
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K.C.
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The answer to your FAQ set forth below is at worst contradictory and at best confusing:
Q: If I refinanced on or after June 1, 2009 am I eligible for HARP 2.0?
A: 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.
At first you state a loan acquired by FM/FM on or after June 1, 2009 is not eligible for HARP 2.0. However, at the end of the answer you state the deadline “was extended by 3 months to June 1, 2009. . . .” If the original cutoff date was March 1, 2009 and 3 months were added it appears June 1 could be in the target date.
Thanks,
K.C.
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LPMI / HARP 2.0Question
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I have an underwater mortgage with excellent payment history and very good credit. I have the Lender Paid Mortgage Insurance (LPMI). I am told by my lender that since I have LPMI, I am not eligible for a Harp 2.0 refinance. Could any one please clarify if that is correct?
Thanks
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Gary Medina
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Yes, you can get refinanced under the Harp program with MI. What ever your current MI payment is monthly will continue as the same, just with a lower interest rate/payment.
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Lyn
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When will the HARP guidelines extend the fannie mae purchase date. My loan was purchased by Fannie Mae on June 5th of 2009. I have missed the original deadline by five days and really need to refi. Please advise if they will extend the sold/or guaranteed date from May 31, 2009. thank you very much
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Thorsten
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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?
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Paul
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My loan is not insured by Freddy or Fanny. What other programs can I qualify for.
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Ron
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Have you looked into HAMP instead of HARP?
Home Affordable Modification Program
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Gina
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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?
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gill
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WE HAD 2nd mortgage on our home can we qualify for HARP
Reply