HARP – Simplified

FIRST: What is HARP? Answer: It’s the (2nd generation) Home Affordable Refinance Program put forth by the federal government.

The good thing about the interweb is that when friends write smart things, I can read them. And share them with you. Dan Green has lots of answers to many of the questions about HARP . From “am I eligible to refinance under this new program (HARP)?” to “can I refinance an investment/rental property with HARP?” to “Is there a minimum credit score to use the HARP program?”

If you’re interested in an excellent primer, read Dan’s post.

Here are the changes announced by FHFA: (no longer available)

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;

• Removing the current 125 percent loan-to-value ceiling for fixed-rate mortgages backed by Fannie Mae andFreddie Mac;

• 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.

Here are the new HARP criteria:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.

• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.

• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

• The current loan-to-value (LTV) ratio must be greater than 80%.

• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 month

Reading over the FHFA’s FAQ (archived: 2013), this question popped out at me:

Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises;

I’m not the only one with this question. For transparency’s sake, who is providing the AVM? Zillow is the one with whom most consumers are familiar, but there are quite a few more out there. Surely, public money being used necessitates letting the public know what “values” are being used. Right?

Now, will this program work? (and what does “work” mean?) Those are completely different questions.

For further reading:

– On the Administration’s Latest Potemkin Help Struggling Homeowners Plan

– On the (not so) Mega ReFi

– On the topic of fairness, there is one condition for eligibility that got me a laugh: The current loan-to-value (LTV) ratio must be greater than 80%. In other words, all “good” borrowers (LTV < 80%) need not apply. To qualify for a new mortgage today one would have to put down a minimum of 20%. How does one characterize the refi? Subsidy comes to mind.

– House Dems: Obama’s response to mortgage crisis is insufficient

– Surprise on Refi Revamp: Key Regulator Agrees to Major Program Reforms

– Twelve Questions on Obama’s Refi Plan