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January 26th, 2012

Does mortgage insurance hurt my chances of a HARP refinance?

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Refi ApplicationOn Tuesday, blog.HSH.com reader Diana wrote in with the following comment:

I have perfect credit, have never been late on a payment, have a low debt-to-income ratio, but I can’t qualify for HARP because I currently have mortgage insurance. WTF? Is this a way to get people to buy mortgage insurance? I am so confused by this. I also heard there is going to be a HARP 3.

Technically, Diana—or anyone else for that matter—shouldn’t be turned down from the HARP program because of mortgage insurance. MakingHomeAffordable.gov explains that HARP has a policy for applicants with and without mortgage insurance, and that both have the potential to qualify.

I’ve enlisted HSH.com staff writer Gina Pogol to provide a bit more of an explanation:

The necessity of mortgage insurance can make it harder to secure a new loan through the Home Affordable Refinance Program (HARP). HARP was designed to help underwater homeowners refinance to current mortgage rates. Under HARP, if your original loan did not require mortgage insurance, your new loan won’t either, even if its loan-to-value ratio exceeds 80 percent (or even 100 percent).

However, if your current loan has mortgage insurance, your new one has to have the same amount of coverage, and that can be a problem. Mortgage insurers don’t want to take on this risk, so they won’t write new policies on HARP refinances. You have to keep your current policy, which means you have to use your current lender. Not all lenders participate in the program or have the incentive to give you a lower rate.

In terms of the “third” HARP program Diana referenced, President Obama did mention in the State of the Union address Tuesday evening that a new refinance plan might be in the works.

You can read more about this possible new refinance program here.

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One Response to “Does mortgage insurance hurt my chances of a HARP refinance?”

  1. Stef Says: June 11th, 2012 at 11:32 am

    Same here Diana. My exisitng lender will not release certain docs my prospective lender (regarding my mortgage ins I carry with them..)asked for to try to help me refi. I am being held at bay, no one can help.
    Something seems grossly illegal or discriminatory about this.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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