HARP 2 Refinance After Short Sale
by Mark in Ft. Lauderdale, Florida USA
Ask Kate about HARP 2 refinance after short sale 2 years ago: Kate: Thanks for all your help here. It's a great forum. I am trying to refinance my first mortgage with my loan servicer under the HARP 2.0 guidelines. They are using Fannie Mae's DU Refi Plus and the problem is a prior short sale over 2 years ago.
Mark continues... DU is giving them an ineligible finding because I am over 80% LTV (well duh, no kidding!) I see in the Refi Plus guidelines (manual underwriting) that there is no bankruptcy or foreclosure waiting period.
But no one (not even my same servicer) is doing manual underwrites because they are exposed to much more risk. Is there any hope for me? This seems contrary to the whole intent of the program.
By the way, I have never been late on any mortgage payment including during the short sale. Two years after the event, my credit scores are in the upper 720's to mid 730's (FICO). My debt-to-income ratio is great with all credit cards paid in full every month. So it's only the mortgage debt that I carry.
Kate Answers: HARP 2 Refinance After Short Sale
***zz-portrait-left.shtml*** Dear Mark,
Consider this! A homeowner who was approved for loan modification through HAMP is still eligible to apply for HARP 2.0 loan if the qualifying hardship has been resolved.
Personally, I cannot see why your situation would be more risky than someone with a past modification, especially since you were never late on your mortgage payment during the short sale.
In just a moment, I'll have some suggestions for you. But first, here's some background on the two Fannie Mae methods offered to lenders for analyzing HARP 2 refinance applications.
Human-Based Fannie Mae Refi Plus
Only the original lender and loan servicer can manually underwrite HARP loans. This traditional method is called Refi Plus.
If there is no greater than a 20% increase in the new HARP mortgage payment, Refi Plus approvals are mainly based on:
- Initial eligibility
- Borrower benefits
- An acceptable payment history on the subject property
Lending Lingo Made Understandable DU stands for Desktop Underwriting. AUS is an acronym for Automated Underwriting System. The name Fannie Mae evolved from Federal National Mortgage Association (FNMA).
Automated Fannie Mae DU Refi Plus
We've just looked at manual underwriting of HARP 2 refinance under Refi Plus. Now let's compare it to Fannie Mae's automated underwriting system, DU Refi Plus.
Note that DU Refi Plus accepts the responsibility for verifying initial eligibility
and establishing borrower benefits
Lenders like DU Refi Plus because they are relieved from vouching for reasonable ability to repay
standards, the dreaded Fannie Mae fine print that could trigger a loan buy-back.
Inside Fannie Mae DU Refi Plus Decision Making
In addition to basic guidelines for credit scores and debt-to-income ratios, DU reviews the complete package. After analyzing hundreds of other factors, including available credit, savings and assets, type of income, residual income, job history, and LTV, it issues an overall recommendation.
Because the AUS is based on approvals of thousands of loans, DU is quite savvy, for the most part. Streamlining the approval process, it saves time and money, as well as reducing the mountains of required paperwork.
But I have seen borderline loan applications receive the go-ahead from DU that made me shake my head, wondering how such a weak file could be approved.
Sadly, I've also seen the converse to be true, strong borrowers picked apart. It would seem this is the group your loan fell into.
So What's Your Next Step
Here is what I'd do if I were you! Disregard the rumor that your servicer quit performing manual HARP underwrites, even if you heard it from your loan originator.
HARP 2 refinances are manually underwritten without exception by the borrower's lender or loan servicer.
Turn your attention to composing a detailed letter explaining the the events that led up to your short sale. Was the short sale brought on by a job transfer? Or an illness in the family? Spell out the entire story. Attach supporting documentation, for example the letter from your employer transferring you to a location too far for a reasonable commute.
It is important to inform your lender of the measures you have taken to prevent or avoid another short sale, if applicable.
Comparing and Choosing HARP 2 Lenders
Then make a written request for your loan to be re-underwritten, this time with a manual review. If the lender refuses or you don't get an approval, move your loan request at once to a different mortgage lender. Second time around, submit your explanation letter with the initial application.
Some lenders add their own restrictions to HARP 2 guidelines
. You need to find the lender with the least overlays, especially regarding short sales.
Check with your friends, family, neighbors, co-workers and ask them which lender underwrote their HARP loan. Were they happy with the service and outcome? Would they return to the lender in the future? This is often a good sign.
For more details, go to Compare Harp 2 Mortgage Lenders - Part 1
and Part 2
Lastly, let your elected representatives on a local, state, and federal level know what you are experiencing. They need to understand what is going on, at an individual and personal level. Homeowners are the backbone of America's economy. They deserve change!
Good luck and best wishes,
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