The Ultimate Guidebook to HARP 2.0
Home Affordable Refinance Program 2012
by the Help4Homeowers2012 Team
www.Help4Homeowners2012.com
OUT WITH THE OLD, IN WITH THE NEW
In years past, prior to the introduction of HARP, when the housing market was booming and values seemed to climb higher and higher into the stratosphere, homeowners never even considered their EQUITY POSITION.
Banks rely heavily on Loan To Value when determining the "riskiness" of a loan. In the olden days, borrowers had put down 20% to qualify for a conventional loan at the prevailing interest rates of that day. Over time, as values began their epic climb, this was no longer feasible and LOWER DOWN PAYMENT programs began to surface.
Their reasoning behind down payments is to protect their investment in the event the borrower defaults on the payments. The bank is forced to foreclose in an attempt to recoup their investment, however, almost always banks are looking at steep losses, 20-40% on average if the property goes to the auction block.
SO WHY IS HARP 2.0 AMAZING?
Quite simply, since 2005 home values have plummeted back down to earth, 30% in some areas of the US. Nearly 50% of all Americans find themselves underwater on their mortgages which means they ARE NOT ELLIGIBLE for conforming mortgage's at todays historic lows.
The HARP 2.0 program provides an avenue for homeowners to secure interest rates in the 4% range, just as if they had EQUITY in their property. The previous version of HARP, provided this program only up to 125% LTV, meaning a borrower could refinance a loan of $105,000 even though the home was only worth $100,000. You can imagine how little this helped homeowners across the country as they were on average underwater by at least 30%.
Now the new HARP program HAS NO LTV CAP! This program will be open to millions more and will provide a major boost to the pockets of Americans in the form of LOWER monthly mortgage payments. This is intended to be a major stimulus to American households and the economy at large.
YOUR LOCAL BANK WILL NOT KNOW ABOUT THIS PROGRAM
You simply cannot walk into the local bank nor phone the loan officer who you may have been working with throughout the years. This program is only available through MORTGAGE SERVICERS who work for government entities like Fannie Mae and Freddie Mac. These servicers are only 3rd party agents that collect monthly payments, send statements and provide other servicers, and in exchange earn a fee from the investors.
A mortgage servicer is a mortgage company like Bank of America, Citimortgage, OneWest Bank, JP Mogan Chase Mortgage, etc...however, these companies often times, DO NOT OWN your Note. Your Home Loan in question is broken down into 2 Components that are often referred to in the process: The Note and the Mortgage. The Note is a Promissory Note, or a legally binding contract you signed at closing detailing the payment, interest rate and terms of your loan to purchase your house. The Mortgage, is a legal instrument, signed in company with the Note, based on your State's local real estate laws, essentially collateralizing your home against the loan. If you default on payment, the mortgage allows the investor and servicer to foreclose and sell your home, to recoup their losses.
The owner of the Note is called the Mortgage Investor and 90% of the time, its one of the above quasi governmental institutions, Fannie Mae and Freddie Mac. These companies create what's referred to as the Secondary Mortgage Marketplace, allowing for a greater level of homeownership due to their ability to fund LOW DOWN PAYMENT mortgages. They provide the liquidity that allow regional and local mortgage bankers and brokers to sell their loans after origination.
A local bank or credit union in the present day operates much differently. They write loans with the intent to keep these loans on their books, often times called portfolio loans. They are both the servicer and investor of the loan, which is why their underwriting standards are VERY conservative. Perfect credit, 20% down payment, short repayment terms are pretty much the only available programs at these institutions.
In order to participate in HARP 2.0 to take advantage of historically low rates, regardless of what your equity position is, 125%, 175% or whatever, you will need to conduct the necessary research to determine if your current mortgage companies are working with Fannie Mae and Freddie Mac. Read this book and you will know how to determine your eligibility.
EXTRA, EXTRA read all about it!
Washington, DC – The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac
(the Enterprises), today announced a series of changes to the Home Affordable Refinance
Program (HARP) in an effort to attract more eligible borrowers who can benefit from
refinancing their home mortgage. The program enhancements were developed at FHFA’s
direction with input from lenders, mortgage insurers and other industry participants.
“We know that there are many homeowners who are eligible to refinance under HARP and
those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco.
“Building on the industry’s experience with HARP over the last two years, we have identified
several changes that will make the program accessible to more borrowers with mortgages
owned or guaranteed by the Enterprises. Our goal in pursuing these changes is to create
refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie
Mac and bringing a measure of stability to housing markets.”
Fannie Mae and Freddie Mac have helped approximately 9 million families refinance into a
lower cost or more sustainable mortgage product, approximately 10 percent of those via HARP.
HARP is unique in that it is the only refinance program that enables borrowers who owe more
than their home is worth to take advantage of low interest rates and other refinancing benefits.
This program will continue to be available to borrowers with loans sold to the Enterprises on or
before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.
The new program enhancements address several other key aspects of HARP including:
Eliminating certain risk-based fees for borrowers who refinance into shorter-term
mortgages and lowering fees for other borrowers;
Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by
Fannie Mae and Freddie Mac;
Waiving certain representations and warranties that lenders commit to in making loans
owned or guaranteed by Fannie Mae and Freddie Mac;
Eliminating the need for a new property appraisal where there is a reliable AVM
(automated valuation model) estimate provided by the Enterprises; and
Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the
Enterprises on or before May 31, 2009.
An important element of these changes is the encouragement, through elimination of certain
risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages.
Borrowers who owe more on their house than the house is worth will be able to reduce the
balance owed much faster if they take advantage of today’s low interest rates by shortening the
term of their mortgage.
The Enterprises plan to issue guidance with operational details about the HARP changes to
mortgage lenders and servicers by November 15. Since industry participation in HARP is not
mandatory, implementation schedules will vary as individual lenders, mortgage insurers and
other market participants modify their processes.
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.
These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets
and financial institutions.
Home Affordable Refinance Program (HARP)
Fact Sheet
Program Overview