A couple of years back we wrote quite a bit about the Home Affordable Refinance Program on this site as my wife and I were going through the process of trying to refinance our home using the HARP program. The gist of the program was that millions of homeowners who previously were unable to refinance because their homes had dropped in value (or were now underwater) or because they would have to start paying extra fees (like PMI), were able to apply for a newly refinanced loan under the program.
Thousands of people like my wife and I were able to take advantage of the refinance program, however, far fewer people took advantage than was expected. Now that home values have continued to drop and rates are even lower, the government is once again considering trying to pump some new life into this foundering program.
Home Affordable Refi Program
The Making Home Affordable program was launched back in 2009 by the Obama administration in an attempt to help struggling homeowners to refinance their homes, free up some cash and provide a boost to a struggling economy. The program was said to have been open for some 9 million eligible homeowners. The problem is the program just didn't work out as planned.
As of August 31st, 2011, only 894,000 borrowers had refinanced through the HARP program. Complaints have been rampant. There have been problems with the program being implemented by loan servicers. People report having applied for a HARP refinance only to have their paperwork lost, or having their paperwork get lost in a maze of customer service dead ends. There have also been problems as home values continue dropping, and now people are having a hard time even meeting the 125% loan to value ratio in order to refinance.
Who Is Currently Eligible For HARP?
So now that the government is considering updating the Home Affordable Refinance Program to make more people eligible, what are the current HARP eligibility standards?
- You have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac.
- You do not have an FHA, VA or USDA loan.
- You are current on your mortgage payments and have not been more than 30 days late making a payment over the last year.
- Have a first mortgage not exceeding 125 percent of the current market value of your home.
- The refinance will improve the long-term affordability or stability of your mortgage.
- You have the ability to make the new payments
- Effective March 2009 – June 30, 2012.
Originally the program had a 105% loan to value ratio, not 125% as it is currently.
What Changes Are Being Considered For HARP?
So what changes is the government considering in order to open the program up to more homeowners? Thus far the government hasn't really released any details about what they think they might change, but some educated guesses have been floated from some people in the know. Among the possible changes:
- Loan to value limits raised from 125% to 150%: Current restrictions say that your current mortgage that you're refinancing can be for no more than 125% of your home's value. So on a 125k mortgage, your home has to appraise for at least 100k. Some people are suggesting that the government may increase the LTV ratio to 150%.
- Loan Level Pricing Adjustments limited or removed: Depending on your equity level and credit score your loan rate could change up to 1.5% or more – meaning you may not be helped by a refinance. Some folks think they may reduce or waive these pricing adjustments.
- Allow more than one HARP refinance: Currently you can only refinance via the HARP program once, and some think the government will remove this restriction. This will be helpful to those that refinanced when the program was first introduced and rates were in the 6% range (like my wife and I) and are now chagrined to see rates in the 4% range.
- Lower fees and costs associated with HARP refinance: Some have suggested that the government will try to limit the costs and fees associated with a HARP refinance since some have signed up only to find their loans are loaded down by fees.
- Allow HARP refinances for Fannie and Freddie loans after June 2009: The current program allows refinances for Fannie or Freddie owned loans initiated prior to June 30th, 2009. Some speculate that they could remove that restriction and allow all Fannie Mae or Freddie Mac loans to refinance.
- Income and employment verification waivers: Some say that there could be a waiver of key income, credit and employment verification procedures – similar to a FHA streamline loan.
So time will tell if they end up making changes that people are expecting. I for one would probably refinance again if the costs were lowered and the ability to refinance more than once was instituted.
UPDATE: As I was writing this post this morning the government and President Obama announced some changes to the HARP program. They said that final details would be sent to lenders by November 15th.
President Barack Obama traveled Monday to Las Vegas, epicenter of the real estate meltdown, to unveil a plan to limit damage from the housing market's downward spiral on the broader US economy.
Part of Obama's plan is to ease rules governing the Home Affordable Refinance Program (HARP), which allows mortgages backed by financing giants Fannie Mae and Freddie Mac to be refinanced at lower rates.
Changes to the program would make it easier for homeowners to refinance mortgages and would lift a rule stating that borrowers can't qualify if their mortgages exceed 125 percent of their homes' value.
Among the major changes to HARP, from the government site:
- Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
- Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
- 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.
So there you go, loan to value ratios will be going away completely, and certain fees would be gotten rid of or lowered among other things. So what do you think, will these changes help the program get more people into a refinance?
Have you already done, or considered doing a HARP refinance? Would any of these changes make a difference for you?