by Broderick Perkins
(5/15/2012) - Rumors of a HARP 3.0 in the pipeline have jelled in the
form of legislation called the "Responsible Homeowner Refinancing Act of
2012," to make it easier and less expensive to refinance under the Making
Home Affordable initiative known as the Home Affordable Refinancing Program
If passed into law, the legislation could bring relief to millions of
more homeowners than the current version, known as HARP 2.0, which was an
improvement over the original HARP launched back in 2009.
Legislation authors U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) say there are 17.5 million
homeowners holding Fannie Mae and Freddie Mac (government supported
enterprises, or GSEs) loans (the only loans eligible under the program) who
could benefit because those homeowners have mortgages with interest rates
above 5 percent.
Interest rates for 30-year, and 15-year fixed-rate mortgages came in at
record lows, averaging 3.83 percent and 3.05 percent, respectively, the week
ending May 10, according to Freddie Mac.
Also on May 10, Menendez and Boxer filed Senate legislation for HARP 3.0, U.S.
Senate Bill 3085. The legislation's next stop is the Senate Committee on
Banking, Housing, and Urban Affairs, provided the committee's chair approves
the measure for a hearing.
Putting an end to rumors, but not quite living up to all of them, here's
an inside look at the "Responsible Homeowner Refinancing Act of 2012."
If passed into law the act would:
Extend streamlined refinancing to additional GSE borrowers
GSEs' overseer, the Federal Housing Finance Agency, recently improved HARP to make more
homeowners eligible, but newly-reduced costs apply only to HARP-eligible
borrowers with less than 20 percent equity. Freddie Mac imposed stiffer
This bill would ensure that all GSE borrowers, who are making their
payments on time, have the same access to simple, low-cost refinances,
regardless of loan to value. A single set of rules also would simplify the
process and make it easier and more automatic for servicers to market and
promote HARP. The bill would also make HARP available to those with loans
made prior to June 1, 2010. Right now HARP is only for those with loans made
prior to June 1, 2009.
Completely eliminate up-front fees
In HARP 2.0, GSEs lowered fees on refinancing HARP loans with less than
20 percent equity, but the bill will prohibit GSEs from charging upfront
fees on any HARP refinance for a loan they already guarantee. Fees can
amount to $4,000 on a $200,000 loan.
Eliminate appraisal costs for all borrowers
GSEs save money by using Automated Valuation Models to determine home
value, but some borrowers are still saddled with appraisal costs of $350 or
more. Removing appraisal costs would remove another financial barrier to
Streamline refinancing application process
HARP borrowers must be current on their mortgage payments and have no
late payments for the last six months and no more than one late payment in
the last 12 months, in both cases, prior to applying for the program. Those
who qualify have already proven they are low risk. The act would reward them
by eliminating employment and income verification requirements to further
streamline the refinancing process. A streamlined process would encourage
lenders to send eligible borrowers a pre-approved application packet they
would only need to sign and return.
Remove additional barriers to competition
Lenders looking to compete with the current loan servicer face
anti-competitive barriers that create higher prices and harsher terms for
the borrower. To unlock competition, the act would direct GSEs to require
the same streamlined underwriting and associated representations and
warranties for new servicers as they do for current servicers.
Require second lien holders, who unreasonably block a refinance, to
pay restitution to borrowers
Second-lien holders often prevent borrowers from refinancing by refusing
to re-subordinate their lien. The bill would force these refinance-blocking
second lien holders to pay restitution to borrowers, provided the refinanced
loan would not increase the risk faced by the second lien holder.
Require mortgage insurers who unreasonably fail to transfer coverage
to refinanced loans to pay restitution to borrowers
Similarly, mortgage insurers who refuse to transfer insurance coverage to
refinanced loans, would be forced to likewise pay restitution for future
According to the legislation's summary, all mortgage insurers except
United Guaranty, a subsidiary of TARP-recipient AIG, have agreed to
voluntarily and automatically carryover existing coverage to the refinanced
loan. United Guaranty insures approximately 15 percent of all GSE loans with
mortgage insurance, according to the legislation.
The legislation says the law would pay for itself through reduced default
rates on GSE loans.
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