The Rise of HARP 3.0
HARP 3.0 New Plan to Provide Relief to Underwater Homeowners.
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A settlement between big banks and the government is set to spell relief for one million homeowners across the US who have been struggling to pay down the principal on their mortgages, but Will HARP 3.0 make it?
Valued at $26 billion, the settlement will help those who owe more than their home is worth by refinancing their loans at lower interest rates, or by reducing the debt from their mortgages. Hundreds of thousands more who already had their homes foreclosed on will also receive a sum to account for their hardships.
The settlement program is currently limited to those homeowners whose mortgages are owned by Bank of America, JPMorgan Chase, Citigroup, Wells Fargo or Ally. However, nine other major mortgage servicers are also in talks with the government, which could expand the settlement to cover more homeowners who would otherwise benefit from loan modifications.
Further, HUD Secretary Shaun Donovan remarked that, in his view, the agreement with the banks would be a catalyst for even more relief programs to take effect. He added that borrowers whose loans are owned by Fannie Mae and Freddie Mac could soon be eligible to participate in a similar principal reduction program.
The Obama administration has hailed the settlement as a major step in holding big banks accountable for the actions that precipitated the housing market crisis, which came to a head in 2008.
In addition to mortgage relief and modification, the agreement also requires banks to follow stricter regulations when dealing with homeowners with underwater loans. Prosecutors can still pursue allegations of fraud stemming from loan origination, as well as the practice of “robo-signing” documents without the borrower’s full knowledge and consent.
The banks that are taking part in the settlement have a three-year window in which to dispense the amounts to homeowners. $1.5 billion will also go to some 750,000 borrowers who experienced foreclosure between 2008 and 2011.
The settlement comes from the efforts of federal government agencies working in tandem with state attorneys general. In his official remarks, President Obama called it “the largest joint federal-state settlement in our nation’s history” and assured Americans that the big banks would be doing their part to redress the actions that led to the worst recession in generations.
“These banks will put billions of dollars towards relief for families across the nation,” he said. “They’ll provide refinancing for borrowers that are stuck in high interest rate mortgages. They’ll reduce loans for families who owe more on their homes than they’re worth. And they will deliver some measure of justice for families that have already been victims of abusive practices.”
HARP 3.0 on the Way?
Relief for homeowners, however, doesn’t end with the settlement. A plan that the President proposed in his State of the Union address would give millions more of responsible Americans the same opportunity to refinance their mortgages.
Under the proposal, more borrowers whose mortgages are current could tap into today’s low interest rates, resulting in the average family saving $3,000 per year in payments.
The Federal Housing Authority (FHA) would operate this program, which would streamline the refinance process for all standard loans owned or guaranteed by non-government-sponsored enterprises (i.e. non-GSEs).
That doesn’t mean that borrowers with GSE loans — those that are owned or guaranteed by Fannie Mae and Freddie Mac — are left out of the picture. They too would have expanded access to streamlined refinancing, so that homeowners with significant equity in their homes could also benefit.
Under the direction of the Federal Housing Finance Agency (FHFA), this streamlined loan underwriting process would increase competition among mortgage servicers and serve to strengthen housing markets.
Even when a borrower wishes to refinance a GSE loan under HARP, he or she usually needs a manual home appraisal to determine his or her eligibility. This is the case especially in neighborhoods with small numbers of recent home sales.
To facilitate this process, the President’s plan would do away with appraisal costs by directing Fannie and Freddie to use alternatives to determine home value, such as mark-to-market accounting.
Additionally, more lenders would be encouraged to participate in HARP, thus giving borrowers a chance at a better deal, by having the same streamlined underwriting in place for new servicers as it already exists for current servicers.
Whether they elect to go through HARP or the new FHA refinance program, borrowers with underwater homes would essentially have two options. The first would be to take advantage of their savings through lower mortgage payments. The second would be to use those same savings toward building home equity — potentially eliminating the gap between loan and home value within five years.
Rebuilding Equity Program
Take Joanna’s case as an example. Joanna’s 30-year mortgage, which originated in 2006, is $214,000 at an interest rate of 6.5%. Today, her outstanding balance on the mortgage is $200,000, but her home’s value has fallen to $160,000. That means her loan-to-value ratio (LTV) is 125. Although Joanna has continued to make loan payments responsibly, at $1,350 per month, a refinance is not currently an available option to her.
If Joanna were to refinance the mortgage at a rate of 4.25% while keeping the 30-year life of the mortgage, her monthly payment would be reduced to $980 per month — a savings of $370 a month, or over $4,000 annually. However, her home would still be “underwater” five years later, with $182,000 as her outstanding balance.
On the other hand, by choosing the rebuild equity option, Joanna could refinance at 3.75% for 20 years and use her savings to pay down the principal balance. In this scenario, she would have a balance of $152,000 in five years — below her current home value. She would also have her closing costs covered by the FHA or by Fannie Mae and Freddie Mac.
Other Homeowner Benefits
Other highlights of the plan as it was first proposed by the President’s administration include:
A homeowner Bill of Rights to establish a fair rulebook for borrowers and lenders to follow, simplifying mortgage forms, abolishing hidden fees and conflicts of interest, and protecting homeowners from unnecessary foreclosure repurposing foreclosed homes that are driving down community home values into rental properties extending the forbearance period to a full 12 months for borrowers with FHA and HAMP loans while they look for employment increasing the scope of the HAMP program and extending the deadline through the end of 2013, while increasing the incentives to servicers to encourage them to provide modifications to borrowers with underwater loans.
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Comments (91)
Lillie Patterson
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will I qualify for HARP 3.0 since I have only been out of Chapter 13 for 9 months.
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Maria Fenyes
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Maria
Is the HARP 3.0 proposal considering an extension or a removal of the cutoff date of June 2009 ?
An extension or a removal of the June 2009 cutoff date would help millions of homeowners who refinanced or purchased their homes after June 2009, since interest rates were still very high in 2009/2010, compared to what they are now.
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Bob
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This is ridiculous. I purchased in 2007 for $153 and the home is now worth about $110. The mortgage is serviced by B of A (I use the word serviced lightly). I started the refinance process in March of 09 and it took them 3 months to refinance which was completed in June 09. Because of B of A taking 3 months I am now inelegible to refinance to a lower rate and term because of Fannie Mae’s guidelines of June 2009. If I were able to refinance to a 15 year fixed it would save me about $30k over the next ten years which is when I probably will be forced into retirement at 62. If they do not allow me to refinance into a 15 year product I probably will default in 10 years from now since I will not be able to keep the house at that point. These idiots in Washington just dont get it. GOD help America we are headed for a big ditch!!!
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mark a hill
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I have written Barbara Boxer, no response. Menendez has his own alleged problems, minor as they may be. I wrote my own Senator Frank Wolf and have not gotten a response. They are busy with gun control, hurricane Sandy; I’m afraid we will not here anything more about HARP 3.
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gary
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As asked before has Congress passed HARP 3.0 yet, if not, when is it expected?
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Steve, California
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It’s great to watch the obama’s partying while I can’t get help on underwater home refi due to mortgage not being backed by fannie or freddie, like tens of thousands of others i didn”t have a choice on who bought my mortgage. try level the playing field, maybe 3.0 will be the answer or maybe being honest, hardworking and playing by the rules is not the american way anymore. maybe obama should listen more to the people that already live hear than the people that are trying to get here!
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gary
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I thought HARP 3.0 has not been passed by Congress and signed by President yet. Am I wrong ?
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Lillie Patterson
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when will harp 3.0 be available?
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Tepty
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What is the status of the HARP 3.0?? Should I keep holding my breath since there will be no hope for me unless HARP 3.0 is passed?
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linda cotrone
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I think many homeowners would benefit from extending or removing the cutoff date of June 2009. There are still many areas in California and other states that have not seen a increase in value of their homes enough to refinance their to the homes to a lower interest rate. We had an appraisal done and couldn’t do the loan because of being 2 percent off of the value. I think if Harp 3 is implemented, removing the cut off date would help many homeowners as well as stimulate the economy, and eventually lead the housing market into recovery.
Linda
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Vivian Mortgage Lender
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There may be other options using FHA for manufactured housing loans, even if you have a Fannie/Freddie mortgage currently. Even if HARP 3.0 passes, the banks/institutions/mortgage company may have overlays not to accept some of the more lenient guidelines. Currently, Harp 3.0 has not passed, but the proposals look reasonable. You need to start with the current mortgage servicer and see if they will do a “DU REFI PLUS”. Or a correspendent Lender to see if they have options to take you to a different mortgage servicer/investor using HARP 2.0 or altogether, FHA or new Conventional Refinance.
The most important thing to look at right now is CURRENT APPRAISED VALUE. Fannie Mae cannot exceed 125% LTV, Freddie Mac cannot exceed 105% …this is for HARP 2.0 ONLY!
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Cathy T
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There are lenders that will go up to 200% LTV for Freddie
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Barbara
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Called for info about refinancing with HARP 2-loan owned by Freddie MAC, told my credit score was too low but HARP 3 might address this situation-is that correct information?
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Brent wright
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I refinanced in March of 2009. Harris bank and Fannie mae didn’t secure the loan until June. Now I’m not eligible because of that. Why did it take you 3 months to secure a loan. Talk about not doing your JOB
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Sean L
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I don’t qualify because I refied in 2010, will they be extending the dates?
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kevin coleman
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my home is own by freddie mae and cant get refinance because we own a moblie home that we not do harp 2.0 loan because we have a molbie home help help
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Jeff Satterthwaite
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Was told I cannot get HARP due to paying an upfront premium so I would not have mortgage insurance. Is there a way around this or any mention of a resolve with HARP 3?
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rallyx
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I have been trying to streamline refi an investment property serviced by greetree servicing through HARP 2 and was declined because they said I had more than 4 properties and they have an overlay that prohibits them from approving me for Harp 2. How much truth is in this? What are my options?
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Miriam
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I am being told I can’t qualify for HARP2 because I had another property which was short sold. I have always been current on this property and have a credit score over 620. The short sale was my only credit glitch. Is this true? One lender said I qaulify and my credit union says I don’t. Which is it?
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C. Ramm
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I refinanced with Chase in Oct 2010 using the HARP re-fi program. I just called to see if I can re-fi for an even lower interest rate and was told I could only take advantage of the HARP program once…didn’t know this when I refinanced or I might have waited. Do you agree with this and if so, will I be able to use HARP 3.0 if it goes through? In 2010 my home had plenty of equity…just got it reappraised and it has lost $65k equity in less than 2 years so even though I have great credit, I do not qualify for a conventional re-fi as I owe more on it now than it appraises for…FRUSTRATING! Hoping I can use the Harp 3.0
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S. Blue
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I’m curious. How did your qualify for Harp 2? I think you home was under appraised as was ours. I’ve been told we will qualify for Harp 3.
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KTaylor
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My lender is HSBC/Beneficial! What more can I say. Their arms are crossed to any rewrites, modifications, streamlines, HARPs, etc. The only way you can get help from them is a “life altering experience”. Sucks when you want to keep your house and just want to take advantage of the lower interest rates to free up some cash. Hum… I thought freeing up cash would help the economy. Hope HARP3.0 is help on the way!
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TAdam
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I’m in the same boat with HSBC/Beneficial. They will not refinance and we’ve been denied a modification. Stuck at 9.5 percent! Ridiculous.
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beeshu
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Same boat as well.
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Donna
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I thought I qualified for HARP but Wells Fargo says that they will not refinance my home because I have private mortgage insurance attached to my home loan. Is this an additional requirement? According to what I have been reading about HARP, I do not see this as part of the requirment for the program.
Thanks
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Chris
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Donna,
If your loan currenlty has PMI you will still be required to have it. However, you can take advantage of a lower rate
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Jesus Lucio
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My loan originated through Country Wide Financial which is now BofA. They will not touch my loan since my house is completely underwater by 45k.
We put down 20%.
Never a day late.
No equity in the home.
BofA lender told us we are a small percentage in the market that is just not ever going to get help.
Anyone have a solution. Hello banks that get bailed out!!!!
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Sean L
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Sounds like me, have you tried the refi program? They said I didn’t qualify because Fanni Mae took out insurance on my loan even though we had nothing to do with that.
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Jim
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We bought our house 7 years ago after a bankruptcy in 2004 so we had to take out 2 mortgages at the time of purchase. The first, the larger of the 2 has a 9.5 percent mortgage and the second a 13.5 percent. I owe $204,000 on the combined mortgages but the town home is now only worth maybe $170,000. We have paid every payment on time and have no debt, but no one will refinance me with a lower interest rate. The current rates will save me $700-$900 per month but we can’t find anyone that wants to refinance. Any ideas, suggestions we are getting desperate and need help this mortgage is killing us.
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severina
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it sounded like the OBAMA proposal for Harp 3.0 is political, because he knows that congress will just turn it down..he is just putting congress on defensive stance so he can use this tactic to his advantage for this election! thats my take.. i am frustrated of political antics of both parties!!!i am a homeowner paying my mortgage diligently every month..in my pool of homeowners, there should be help.
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Janet
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I currently have a loan under Bank of America, FHA Ginnie Mae which does not qualify for the 2.0 HARP. My home is also a Manufactured home which puts another wrench in the mix. I am hoping the HARP 3.0 will allow me to refinance as I am now at 6.0 %. I am definately underwater but I am current on my house payment. Has anyone else run across this problem and can anyone tell me why they seem to discriminate against those who have manufactured homes?
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Echo Nott
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Does anyone out there know if there’s any help for those forced into a reverse mortgage?? Daughter takes care of me, now ill herself and would like to have a way to help her help me and leave her something but can’t afford this huge home anymore!!! This bank should not get a lifetime of our hard work!!! Husband unexpectedly died in 07 right as housing went to hell. Was on adjustable and planning to sell our very unique, hard to find property w/2 homes in one on 2 acres…a bit overbuilt for area but was listing realisticly in the the upper 500,000′s. Lost husbands pension after his death due to a loop hole….I’m 80 and disabled and was forced into this reverse and and am now under water with loan bal at 300,000. Would like to reduce the loan bal. so I can sell and get out of the reverse. Have lost everything!! Any help out there anywhere?????
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TP
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Our primary mortgage is with HSBC and not backed by FAnnie Mae, however HSBC doesn’t offer a refinance program. Do you know of lendors that can help us?
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Chris
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TP,
The HARP 3.0 should be the program for you….It’s supposed to not matter if the loan is not owned by Fannie or Freddie. However, you must be current on your payments.
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lisa
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do you have freddie?
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