HARP 2 Mortgage Lenders
by Chris in Phoenix, Arizona USA
Ask Kate what's up with HARP 2 mortgage lenders: Hi Kate! I'm struggling to find a HARP 2.0 lender willing to refinance my mortgage. I meet the basic criteria (Fannie Mae-backed loan, LTV above 80%, on-time payments, ability to repay, and the new loan would lower my interest rate and payments). I am so confused right now, because I thought the criteria for refinancing was very straight forward.
As I call around, I am finding some lenders are only taking applications from their current customers. Other lenders have loan-to-value (LTV) restrictions. I was also turned away because I don't have PMI.
Then, my current lender told me I wouldn't qualify because I have a HELOC and that no lenders would refinance under HARP if there was a second mortgage. I was not satisfied with that response, so I spoke with someone else who said that if the system would not give a waiver of the appraisal, the max they could loan would be 100% of the home value.
Do you think that the representatives I am speaking with are unaware of all aspects of the new HARP 2 program? Or are each of these lenders putting their own restrictions in place?
If they are putting restrictions in place, why are they allowed to do this and still say they are participating in HARP? Thank you for your response.
Kate Answers: What's Up with HARP 2 Mortgage Lenders
Yes, this qualifies as the strangest HARP feedback that I've received...
You were told you did not qualify for HARP 2 because you do NOT have
private mortgage insurance? Truly, it's a HARP Zoo right now!
But why? Demand among homeowners has been building since October of 2011 when HARP 2 was initially announced.
Besides the astonishing surge in refinance applications since HARP 2 March Announcement
, lender overlays, which by the way are allowed by Fannie and Freddie, magnify the chaos. More on overlays in a moment.
Add that to differences in guidelines between manual and automated underwriting, and what do you get? Confusion.
3 Approval Methods for Your HARP 2 Refinance
- Your participating loan servicer can manually underwrite your refinance (the old fashion way).
- Your participating loan servicer can approve your refinance based on the proprietary software recommendation (automated underwriting).
- Other participating lenders (in addition to your servicer) can approve your refinance based on the proprietary software's recommendation (automated underwriting).
Participating loan servicers still have some latitude under manual underwriting, if they choose to exercise it while evaluating a borrower. This is because they (supposedly) have access to your original loan file.
But loan servicers and other participating lenders can use Fannie Mae's Desktop Underwriter, DU Refi Plus
, or Freddie Mac's Loan Prospector, Relief Refinance Mortgage
, software to obtain a recommendation.
You're catching on now so I probably don't have to mention that each of these ways of underwriting have slightly different guidelines!
Underwriting software gives a recommendation. But only a human approves the loan request, basing it on the recommendation.
Why Wasn't Your HARP 2 Loan Approved? Overlays!
If you can't get loan approval because your lender keeps coming up with odd conditions, attach this word - overlay - to the bull's eye of your favorite dart game.
When participating lenders are allowed to pile stricter requirements on top of Fannie Mae and Freddie Mac guidelines, the conditions are called overlays. These inconsistencies between lenders create confusion among homeowners who are attempting to get relief from underwater mortgages.
Combine the overlays with loan originators who have not received adequate HARP 2.0 training and inexperienced mortgage personnel hired to handle the glut of loan applications.
Top it off with lenders who don't want to admit to overlays, blaming them on Fannie and Freddie guidelines. Sigh.
So is There Any Hope for a Successful HARP 2 Program?
Yes! There are
homeowners who are currently being approved to refinance under the HARP plan by Making Home Affordable.
Once the lenders begin experiencing success with Fannie Mae and Freddie Mac, I think we will see a snowball effect of more and more approved refinances.
In other words, once participating lenders feel more confident that they will not have to buy back their loans from the Mortgage Giants, more HARP refis will be approved.
Where can Struggling Homeowners Turn in Addition to the New HARP 2 Plan?
I recommend pursuing HARP 2 (if you have a Fannie Mae or Freddie Mac backed mortgage) even though it will require a little tenacity on your part.
But what are the options for homeowners without Fannie or Freddie type financing or who can't be approved for HARP 2?
Follow these links to my pages with HARP refinance alternatives from Making Home Affordable. You will find descriptions and who is eligible for consideration under them.
Now if you don't mind waiting to see if this option will ever materialize, there is the Proposed Obama Streamline Refinance Plan
which, as I've mentioned, is still in its proposal state.
Other options (that might make your stomach sink) are the Making Home Affordable Foreclosure Alternatives (HAFA).
Chris, good luck with your refinancing.
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