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)
Tara
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If HARP 3.0 is approved, does the bank that owns my loan have to agree to this? This German-owned bank prefers foreclosing — bad history of denying mortgage mods. I have a feeling they won’t cooperate.
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Bill
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Is you loan owned by D Bank?
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Tara
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Yes…..
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Joe Garramone
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I refinanced my home in September , 2009.
I understand the cutoff is June , 2009 or earlier for mortgages . Has the HARP 2 program revised the cutoff dates?
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Pat Gorman
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This is the question I am trying to get answered also; Daughter bought home in 7/09 so is not eligible for present HARP program, even though she is underwater presently & loan under Fannie May/Freddie Mac. There MUST be a solution to this situation somewhere.
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Cary Lubet
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Wells Fargo advised me I qualified for harp but because sba has a lean on home, ( I am current with both mortgage and sba ) they would not refi even though sba has no problem with the refi, any suggestions.
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Florence
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we own several investment properties which have lost considerable value.
All payments have been made. Is more than one property eligible for this program?
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lisa
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yes you should contact your lender.
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Mario
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has Aurora bank, and PNC been approved for this program?
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candy
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HARP 3.0 is still sitting in the senate. And if I were you, I would stay VERY far away from PNC. I tried to do a HAMP with them 3 different times, and was denied each time. Then they offered me an “in-house” modification which added $14000 to my principle and an extra $500 per month to my mortgage payment. I tried to apply for HARP 3.0 and the best offer that they had for me would add $6600 to my principle and only save me $48 a month–Face it, the banks were all very eager to get our bailout, but since there were “no rules” attached to the bailout, the banks still hold all of the cards. As soon as I am able to, I plan to bail on PNC they’ve been so horrible! I really believe that they have nothing but a bunch of idiots running these programs–because each week when I call for a status update, I’m told something completely different than the week before. And are you aware that every bank gets a kickback from the fed govt for each “application” that they take in for HAMP or HARP? So the banks are still making money and not giving anything back to the taxpayers that let them keep running in the first place.
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Florence
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We have several investment properties which have lost considerable value.
All payments have been made. Is there a limit on the number of properties eligible for refinancing under this program?
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Chris
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Hi Florence,
You cant have more than 4 financed properties on your credit report. Since this is an investment property you can only go up to 105% of the appraised value
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Lacey
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Will the Harp 3.0 program help us if we are just above water (because we have paid $100/month on our principle for quite sometime) but don’t have 20% equity anymore. This is so frustrating that so many people don’t qualify for anything just because their loan isn’t owned by Freddie Mac!!!!
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Ryan
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Hi Lacey,
Your home loan can also be owned by Fannie Mae. I would be more than happy to check for you. Have a wonderful day!
Ryan
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John
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What if my loan still isn’t with these additional 9 lenders?!?! what am I supposed to do?!!!!
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Ryan
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Hi John,
Just because your home loan isn’t held by the current lenders above mean you cannot refinance under HARP 2.0. I would be more than happy to help.
Ryan
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Bob Wilson
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We did get a mortgage modification 2 yrs. ago but we are underwater with the mortgage. Our income has dropped since then. We keep up to date with the payments although they are sometimes late. We need a reduction in the principle of the home. How can we do this?
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Sally
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Are 2nd homes and/or investment properties eligible for HARP refinancing?
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Ryan
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Hi Sally,
2nd homes and investment properties are eligible under HARP 2.0. Hope this helps. Please email me with any questions. I’m more than happy to help.
Ryan
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Vinnie
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Dont believe it for a second. Lost my job of 14 years in Dec 2011. Wife works as a teacher. My mort balance is 286K, house is worth 230. I applied to Seterus, my mortgage company, for a HAMP (modification). I was declined because I do not qualify for IDP, the “imminent default program”. That is because I am current on the loan. A second reason was that they took my business income (which I opened after I lost my job) GROSS, not after expenses, do adding it to my wifes gross income, we are at 27% mortgage to income. You must be at least 31% ore more to qualify.
THen, we were told we are perfect for Harp 2. We applied to Wells Fargo. They turned us down. Reason: Since you dont have your loan with us, its unlikely that we can get you a refi. Also, you had a short sale on a second home in 2010. Yes, but HARP guidelines say you can have a short sale in your past, a long as its older than 2 years. Doesnt matter they said, its OUR guidelines. So, we are told by our bank, no to HAMP, you are too responsible. I am told to go do a HARP with another big bank. I pick Wells, who we have accounts with since 1991, they turn us down because of their rules. I dealt directly with Fannie Mae to help on both, the last email I got from them, after informing them of 2 turndowns, was “I wish you good luck in trying to get a refinance in the future”. A beaurocrat out of the Los Angeles office.
We bailed out banks, they wont help us, and this government does not have the spine to make them.
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Liz Kinder
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Any hope for non Freddie/Fannie mortgage holders?
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Pete Hamper
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My home’s value is still more than my payoff amount, even though the house has declined in value from $315,000 in 2007 to $205,000. My income has decreased 40% since 2007, and I’ve gone through a divorce. I am current on my payments but it is very difficult to do. My interest rate is 6.625% on the loan. I would like to know what program I would qualify? The bank who I deal with won’t budge on reducing my interest rate, even though new loans there processing are 2.5% to 3.% less than mine.
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Gerald
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Has anyone heard an update about Harp 3.0? Currently, only my lender will refinance with me so we have no leverage at all. We have been current with all of our payments and our house’s value has dropped 100k (purchased in 2009).
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Ryan
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Hi Gerald,
May I ask why you feel your current lender is the only option. Please feel free to email me anytime with any questions.
Ryan
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denise
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yes .. anyone out there .. is harp 3 in affect yet ??? i really waiting on this .. i have a 6.99 percent .. trting to re-fiance for a long time now .. i can’t .. i owe 200,000 and they say my house is only worth 100,000 .. and i paid 125,900 back in 2000 .. so yes i need this to take affect .. thanks
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Brad Ziegler
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I’m in the same boat as Larry Young stated. We have been current on our payments but our house is about 70,000 underwater. There are no programs that will let us refinance at a lower rate. If you don’t have a mortgage backed byFreddie or Fanniemae or the other 9 lenders your sunk. CitiMortgage offers nothing for me except headaches.
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pat chiarello
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I had applied three times for a loan modification and all three times denided.Due to the investor do not participate. What can I do? Any advise would be greatly appreciated.
Thank you,
Pat
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james007
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this is how i ended up here. in 03/2009 i filed for divorce not knowing that i would end up with the house. so i did a refinance through my credit union to remove my ex wife,s name off the mortgage of the house. i got a mortgage @6% 155,000.00 30yr a payment of 1,200.00 that includes property taxes. in 03/2011 i went to refinance and was locked in @3.8% the loan was approved and i was waiting for the appraisal to come in. it came in alright at 134,000.00 which killed the loan on the spot. now the harp 2.0 comes out i was hoping to qualify for that but i don,t. it states in the qualifications that you must have closed on or before 05/31/2009. i closed on 07/01/2009! i would like to know how they came up with that! and what the chances are that the date of 05/31/2009 gets pushed through to 12/31/2009 that would be great!
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ken west
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I am in the exact same senario as you! I have been unable to get any any confirmation on moving the date….have you heard anything?
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gene
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For HARP the date is 5/31/2009. For HARP the loan must be a Fannie Mae or Freddie Mac loan. So even if you close before this date and the loan is Fannie or Freddie loan, you are out of luck.
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minnie
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Wells Fargo offered me a refinance with no closing in 2011 at 5.5 not mentioning I was eligible for harp. since I had my mortgage since 2006 I took it and now can not refinance through harp
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Bill Morris
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Ya, a lot of banks did this without really letting people know what was going on. It is sad to say, once a mortgage has been refinanced it no longer can be refinanced using the Harp program. One side note, there are costs associated with every refinance that need to be paid one way or another.
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Larry Young
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What if my mortgage company is not one of the additional 9 that will be added? Does that mean I can never get any help? My home is about $70k underwater and it just doesn’t seem fair that some people can get help while others can’t. I have never missed a payment or been late since my loan began in 2005.
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Nicholas
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Im in the same boat. Any help for us????
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David price
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There would be no need for harp3 if fanniemae would remove.
June1,2009cuttoff.
Thanks
David
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Bill Morris
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HARP 3.0 will still be needed because if focuses on the loans currently not backed by Fannie Mae or Freddie Mac. A huge sector is caught in this pool.
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Alfred G.
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My wife and I are anxiously waiting for a revision of the program that would apply to us. We bought our house in Sep-2009 (after the cut off date) and our house value has dropped over 20%. Even though we are current and our loan is with Fannie Mae we do not qualify for HARP 2.0 because of the purchase date.
Will the qualifying dates for the program be extended beyond Jun-2009?
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Ryan
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Hi Alfred,
I’ve seen this many times & wanted to help answer your question the best I can. Just because your loan isn’t eligible for HARP, doesn’t mean you are not eligible for other products available in the market. I recommend contacting your local mortgage professional. You may still have options to take advantage of lower interest rates.
Ryan
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Mildred
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Yes, when will this program start!!!Be it soon…I myself can not get any help from the bank that I have my mortgage with..
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Cynthia
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What about if you have a 2nd mortgage owned by Chase but the 1st mortgage is owned by Freddie Mac. Can the HARP 3.0 work for you?
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Ryan
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Hi Cynthia,
If your 1st mtg owned by freddie is eligible for HARP, you would actually need to inquire on a subordination with Chase on your 2nd mtg. Hope this helps.
Ryan
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Barbara
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Can a 2nd be combined with the first when refinancing on this new program HARP 3.0?
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Mere
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You cannot roll second mortgages into the harp program. You can do a conventional cash out and pay off your second mortgage.
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Jamine
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You did not say anything about homeowners who have the Morgage Premium Insurance. They do not qualify for HARP 2 or 3. Is that true?? If true, will HARP continue to extend help for people with MPI.
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Jeff Majtyka
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Jamine, I’m with everyone else waiting for that magical March 19th date when the 2.0 program kicks off. Streamlined version anyways. I also have (PMI) and from everything I’ve read, yes you do qualify if you have PMI. (Private Mortgage Insurance). It wont be eliminated or raised, but you still qualify. Read further into this program on Bills.com for more help.
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Bill Morris
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It is possible to do a HARP refinance with PMI. However, it comes down to weather it was lender paid or not.
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Colibri
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Is there any talk of removing the restriction on the PMI? Having lender paid PMI is the only thing keeping me from qualifying.
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ryan
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Just to clarify my response below. Both lender paid pmi, & borrower paid pmi are eligible if you qualify for HARP 2.0.
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ryan
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Hi Jamine,
I believe you are inquiring on (PMI)- private mortgage insurance. If this is the case, HARP 2.0 has approved PMI transfers on exsisting Fannie & Freddie owned homes that qualify for HARP 2.0. Standard requirements still apply.
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Martha
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I hope they will extend the eligiblity date beyond the May 30 2009 date. Lots of us refinanced around that time but we are under water now ,therefore making us ineligible to take advantage of the current lower interest rates. Sadly, innocent working people have been been hard ,all because of corporate greed.
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Koolguy
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Harp 3.0 says that “The settlement program is currently limited to those homeowners whose mortgages are owned by Bank of America, JPMorgan Chase, Citigroup, Wells Fargo or Ally.”
What if the investor for my Bank of America mortgage is ‘Bana Las Hsi’ (They are another investor like Freddie Mac). Will I still be elegible? Is Bana Las considered an Ally of Bank of America.
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Lewis
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Are there any plans to extend the eligibility date past the May 30, 2009 deadline for refinancing your mortgage?
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Brian
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We are standing by waiting on this to pass congress !
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Kelly
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When will this program start???
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Chargers Fan
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Ask your Congressman….
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Kelly Hauk
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I hope the banks do there part!!!! They do not like to play by the rules!!!!!
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