Ask Kate HARP 2 Refinance Plan Update

by Karen in AZ, Chris in FL, Kathryn in AZ, Cathy in CA, Donna in FL

Ask Kate for Harp 2 Refinance Plan Update: Have you written your state and federal representatives about your progress (or lack of) with HARP 2 mortgage refinancing? Until homeowners turn up the volume by making their struggles know, not much can change. If you wish to accompany me to meet face-to-face with Congress, I welcome you to join me!


Ask Kate continues... However, I'm still waiting for my invitation to the Capitol. :) Now keep reading for 5 more questions from homeowners with underwater mortgages who are struggling through HARP 2.0 refinancing.

1. HARP 2 is already phasing out for HARP 3?

By Karen in Gilbert, AZ: Kate, I finally asked the bank why they are not following the HARP 2 guidelines, they told me because it is too much of a risk to refinance those with LPMI. Their advice was to wait until May to see what the new HARP 3.0 guidelines would be and then perhaps they would be able to ease up on "their" 2.0 guidelines.

Major bank not following guidelines? Told me to wait for HARP 3? Are they for real?? I have researched 3.0 but there is not enough information to tell me whether it is worth the wait.

I know I can shop around, but because of the LPMI and my current reduction of income, I am not getting any closer to a lower rate (currently 7%).

It seems I can't get refinanced anywhere. I would like to know if you have any information on HARP 3? Thanks so much, Karen

***zz-portrait-left.shtml*** Ask Kate answer: Hi Karen, Nice to hear from you again!

The main components of HARP 2.0 removed the LTV restriction for 30 year fixed rate mortgage refinances (or lower terms).

It also opens refinancing doors to homeowners in spite of having mortgage insurance, whether borrower or lender paid (BPMI and LPMI).

But I'm not sure the big banks got their updated HARP 2.0 memo yet. However, all is not lost. Let's see what next week brings.

Now for HARP 3.0! HARP 3.0? If it weren't so serious, this would give me a giggle. HARP 2.0 is just (barely!) out the door and they are telling you to wait for HARP 3.0?

Although I have seen no official announcement from Fannie or little brother Freddie, I believe they are referring to the Proposed Obama Refinance Plan. Emphasis on "proposed".

2. But I don't have LPMI!

By Chris in St Augustine, Florida: Kate, I have found myself in a dilemma and need your expert guidance. I recently attempted to refinance with the introduction of the new and improved (smoke & mirrors) Obama HARP 2.0 refi program.

My lender informed me that I do not qualify due to LPMI.

I originated this loan in 2008 and closed the loan with a 23% cash down payment. This loan was bought by "Big Bank" and sold to Freddy-Fannie.

My loan documents make no mention of PMI, LPMI, or any other type mortgage insurance. Is this supposed to be disclosed to me? Where would I find info on who, how, and why LPMI was applied to my loan. "Big Bank" has provided zero help. Lastly, is there any recourse on my behalf? Thank You.

***zz-portrait-left-super-kate.shtml*** Ask Kate answer: Hi Chris, Don't sit back on this one.

It is against the law for a bank to impose MI with 20% down payment. (But a full 20% must have gone in total to the downpayment, not closing costs, to avoid MI.)

Banks must also fully disclose the MI in your loan documents.

Ask for written proof of the MI disclosures, signed and dated by the lender and you. If they can't produce the paperwork, contact an attorney.

If they can't document LPMI, you cannot be denied your HARP 2.0 loan on the basis of mortgage insurance.

Go here for more details: New HARP 2.0 Loan Mortgage Insurance Improvements.

3. Can I refi an existing HAMP mortgage into a HARP 2.0?

By Kathryn in Arizona: Kate, In Jan 2010, I permanently modified my interest-only loan under HAMP. I was never late on the payments.

I qualified for the HAMP loan modification due to "imminent default", meaning the interest-only loan rate was scheduled to soon reset to a much higher interest rate, thus making the loan unaffordable based on my currently projected income.

Can I now refi under HARP 2.0 given that I have already modified under HAMP? With interest rates at near 4% now, I would like to avoid the 5% rate that I am locked into for years 7 through the remainder of the HAMP modified loan terms.

Thanks for sharing your knowledge through this blog. Hope you can find time to reply to my question.

***zz-portrait-left-help.shtml*** Ask Kate answer: Hi Kathryn,

Under HARP 2.0, a HAMP loan modification can be refinanced under certain circumstances.

Besides meeting...
  1. initial eligibility requirement
  2. payment history requirement
  3. borrower benefit requirement
... the circumstances relied upon for the modification must also be resolved.

So write a detailed letter explaining why you pursued the HAMP loan modification and how it resolved the danger of imminent default. Attach any documentation that backs up the letter.

4. Consolidating 1st and 2nd mortgage with HARP 2.0 loan.

By Cathy from California: Hi Kate, I was told that I could only refinance the 1st mortgage on an investment property with the new HARP 2.0 program. Why is that? Both loans combined would have an LTV of about 118%.

Is there a way to roll both loans together, or should I be satisfied refinancing at least one loan for the underwater property?

***zz-portrait-left-empower.shtml*** Ask Kate answer: Hi Cathy,

Yes, only 1st mortgages are eligible to refinanced under HARP.

This hold true whether the subject property is owner-occupied, second home, or an investment property.

2nd mortgages, as long as they meet Fannie Me and Freddie Mac requirements, do not have to be paid off.

There is no combined loan-to-value restriction (CLTV). But the lender holding the 2nd must agree to subordinate to your 1st mortgage at closing.

Go here for more details: New HARP 2.0 Loan Property Improvements.

5. No HOA reserves in condominium project.

By Donna in Boca Raton, Florida: Kate, I currently have a Fanny Mae loan with Wells Fargo and live in a condominium, however my condominium phase where I live does not have any reserves in the HOA, would I qualify?

***zz-portrait-left.shtml*** Ask Kate answer: Hi Donna,

HARP 2.0 refinance reduced condo re-qualifying guidelines, especially Fannie Mae.

Fannie Mae requires that lenders warrant the condominium unit is not in a condo hotel development or houseboat. In most cases, insurance coverages will also be verified.

But the lender shouldn't be as interested in combing over the condo docs. (Remember how this happened when you purchased your unit?) So if neighbor Joe purchased multiple units in the development last year, it could have no bearing on your HARP 2.0 approval.

It is less clear how Freddie Mac is handling condo reviews. See comment below.

Best wishes everyone and please comment on your progress,


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HARP 3.0
by: Lori

HI Kate - my rental property did not qualify for HARP 2.0 since the closing date was 6/1/2009 but funded to fannie mae on 6/8/2009. will HARP 3.0 change any of the dates or are some of just completely out of luck...
Hi Lori, Kate here. Good question! I have not heard of date changes. To top it off, reasons for the dates seem quite pointless. I will post new dates when I hear. Thanks for asking, Kate

Freddie Mac Condo Loan under HARP 2
by: Condo Owner

Hi, Quicken Loans just informed us that the HARP 2 refinance for Freddie Mac loans does not include condos. Is there any truth to that statement? Thanks.

Hi Kate here. Fannie Mae makes for an easier read on condos than Freddie Mac. I see conflicting Freddie info. Guidelines are constantly evolving and lender overlays further restrict HARP 2.0 enhancements. I'd try a couple of other lenders to compare results.

Please report on the progress. Everyone will benefit.

Thanks for writing and best wishes, Kate

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