Real Estate Market

Mortgage pundits abuzz with HARP 3.0 rumors

by Broderick Perkins

(5/3/2012) Erate Exclusive - It's no wonder the HARP 3.0 rumor mill is working overtime.

Three years into HARP (Home Affordable Refinance Program), the refinancing centerpiece of the Obama Administration's Making Home Affordable initiative, and only 30 percent of senior loan officers from 58 domestic banks and 23 U.S. branches of foreign banks reported that they were actively soliciting HARP applications, according to the recent "Senior Loan Officer Opinion Survey on Bank Lending Practices."

The Federal Reserve study comes six months after the Federal Housing Finance Agency announced the so called "HARP 2.0" to attract more borrowers and lenders with upgrades to the original version.

While still only available to borrowers holding Fannie Mae and Freddie Mac loans, one of the program's primary draw backs, HARP 2.0 came with some mighty improvements and it has helped boost the refinance segment of the mortgage market.

HARP 2.0

HARP 2.0 is a refinance program designed for borrowers with mortgages made prior to June 1, 2009, even if the mortgages are underwater, that is, larger than the home is worth. The program expires Dec. 31 2013.

The most beneficial change was removing the 125 percent loan-to-value (LTV) ratio ceiling for mortgages refinanced to a fixed rate loan. Under HARP 2.0, it doesn't matter how far the borrower is underwater, provided the new loan is a fixed rate mortgage (FRM).

The minimum LTV ratio on the old loan remains at 80 percent. While there is no LTV ceiling on a new FRM loan, if the new loan is an adjustable rate mortgage (ARM) the new loan can have no more than a 105 percent LTV.

Also, homeowners must be current on their mortgage payments and have no late payments for the last six months prior to applying for the program. They may have no more than one late payment in the last 12 months.

Unfortunately, the upgraded HARP version came with many disqualifiers. Banned from the program are:

• Ginnie Mae, Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) mortgages.

• Loans carrying lender-paid mortgage insurance.

• Cash-out and jumbo loan refis and loans held by self-employed people.

• Borrowers behind on their payments more than once in 12 months or borrowers with a single late payment in the last six months.

HARP 3.0?

The first hint at closing some of those gaps came during President Obama's Jan. 24, 2012 State of the Union Address, when he alluded to a new effort to include more lenders and to remove some of the burdensome fees associated with HARP refinances.

Legislation being drafted in Congress likely will seek to remove the Fannie Mae, Freddie Mac requirement and open the program up to riskier subprime mortgages and "Alt-A" loans which are riskier than prime loans, but not as risky as subprime notes, according to Dan Green, a loan officers with Pewaukee, WI-based Waterston Mortgage and publisher of The Mortgage Reports

Other rumors indicate a HARP 3.0 could be available as early as June, even to jumbo loan borrowers and, ahem, hard-working self-employed stiffs who have been abandoned by federal mortgage relief programs.

Robert Chrisman at Mortgage News Daily says his sources tell him "(HARP 3.0) will allow conforming loans to be refinanced through FHA regardless of LTV or note holder."

Stay tuned.

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