Fannie, Freddie release HARP 2.0 detailsby Tim Manni
While both documents are meant for lenders, and thus are rather technical, we’ve just begun to dig out the specifics, and will have more details on HARP 2.0 as they become available.
Here are the enhanced portions of HARP 2.0 and what they mean to you (these details are for those borrowers with an LTV ratio of 80 percent or higher and are refinancing through their same lender):
Your lender will no longer need to guarantee to Fannie and Freddie that your original mortgage met all its eligibility requirements.
What does this mean? This means that lenders will be more willing to refinance your loan since they will not be held liable for any errors in your old mortgage loan.
You will be required to prove that at least one borrower has a source of income and that it is verified.
What does this mean? This will make it easier to qualify if you used to be a two-income family and you are now a one-income family. Typically, all borrowers on the mortgage will need to show income documents.
You can have one thirty-day late payment on your mortgage in the past year, but none in the last six months.
What does this mean? If you have been scrambling to make ends meet and have had some late payments in the last year, you should take all steps available to get your payments in on time so as not to lose eligibility.
The lender will no longer be allowed to use the original mortgage as a basis for valuing your property today, and only a proprietary Automated Valuation Model (Home Value Explorer) can be used to value the property.
What does this mean? The old values under which you got your mortgage are thrown out the window, so it doesn’t matter what your home used to be worth. For the purposes of making your new mortgage, no appraisal will be performed, except a reference against the market no more than 120 days old. This should streamline processing times and save you money.
Add-on fees will be chopped. If your mortgage has a loan-to-value ratio of more than 80 percent, and if you can qualify for a new fixed rate mortgage with a term of 20 years or less, there will be no add-on “risk” adjustments. For fixed rate loans with terms longer than 20 years, the total fees will be only 0.75 percent. These fees were as high as 2.75 percent.
What does this mean? The reduction in fees means that your out of pocket costs will be less, or that adding them into the interest rate will still leave you with rates that are attractive enough to consider refinancing. Previously, they might have added as much as a full percentage point to the interest rate.
Qualifications–do you qualify?
HARP 2.0 will now run though December 31, 2013, and applications under the new guidelines can be accepted by lenders starting on December 1, 2011.
You are eligible for HARP 2.0 if:
- Your loan is owned or guaranteed by Fannie Mae or Freddie Mac
- The mortgage was sold to Fannie or Freddie prior to May 31, 2009
- The mortgage has not already been refinanced under HARP, unless it was refinanced under HARP between March and May 2009
- Your loan-to-value (LT) ratio is above 80 percent
-You haven’t been late with a mortgage payment in the last six months and have no more than one late payment in the past year
HSH.com VP Keith Gumbinger contributed to this post