HARP 2 Refinance Guidelines
by Elaine from New Mexico
HARP 2 refinance guidelines and Freddie Mac's Loan Prospector inconsistencies: Hi, We have a Freddie Mac 1st mortgage with a major lender and they won't do HARP on it because they didn't originate the loan. They bought it from the original lender 5 years ago, before the crash. We also have a 2nd mortgage with another big bank.
Their subordination form is all set to deal with HARP 2.0 but we just can't get that far.
End of January or early February we applied with a local mortgage lender who had Freddie Mac's Open Access. But this was not HARP 2.0 yet. Our credit score was 711, we don't have PMI, we have a perfect payment history, a great salary, and we passed Loan Prospector's approval.
In addition, we have not added to our debt for over 18 months. We are on a strict debt reduction plan in preparation for retirement.
Based on an appraisal done last year, we had a 111% combined LTV. But the lender turned us down because we didn't have enough open (available) credit. They suggested borrowing from family to pay down our 2 open credit cards, an idea we rejected. Fortunately, we had not paid for another appraisal yet.
Mid March (the week it was available) we applied again through a local bank that's been advertising Open Access on Harp 2.0 all over TV since December. HVE was used instead of an appraisal, and the value had gone up, so our combined LTV was 106%.
HVE stands for Home Value Explorer, Freddie Mac's automated tool that calculates property value estimates within seconds.
The only other things that had changed were that we'd made monthly payments on our debt, lowering it by a smidge, and our credit scores came in a little lower, due to the credit inquiry earlier, but still 40 points above the minimum required by the bank and Loan Prospector.
LP turned us down. The banker worked and worked it with IT and managers, and they could not get it approved by LP so everything stopped there.
I would like to hear your comments on this and if you have any suggestions as to what to do next.
In both cases the loan payments would have dropped by $300 per month, allowing us to pay off other debt quicker. I just don't see how we are risky at all considering our credit history and job and salary history. Thank you.
Kate Answers: HARP 2 Refinance Guidelines and Freddie Mac's Loan Prospector Inconsistencies
Sounds to me that you are the type of borrower HARP was originally designed to serve.
How confusing and frustrating to slip between the cracks in spite of strong qualifications. But I can think of a few reasons that Loan Prospector didn't issued an Accept the second time around.
1. Freddie Mac updated their automated underwriting software, Loan Prospector, to accommodate new HARP 2.0 guidelines in March 2012
2. The particular mortgage lender may not be telling you of their overlays
, additional company-induced restrictions added to HARP 2.0 guidelines.
3. Underwriting software can be very sensitive. A seemingly inconsequential change in data can create a different automated response. So although the lender assures you that your credit score remains 40 points above the cut-off, the fact is, January's scores were higher.
Loan Prospector offers feedback, a recommendation. A human reviews the automated findings and makes the ultimate decision.
Compare HARP 2.0 Lenders
You could apply to another lender to create a comparison of HARP 2 refinance guidelines. But I want to caution that you run the risk of lowering your credit score even further due to yet an additional credit inquiry.
Think this over to decide if a refinance is worth pursuing. Do you need a lower interest rate because your mortgage payment is no longer affordable? If so, it may be worthwhile applying to another participating Freddie Mac lender
I might add this too. Although inquiries decrease credit scores, with time they usually rebound.
Watch my mortgage blog
for announcements and clarifications on new and rumored loan programs for underwater mortgages such as HARP 3.0 Fact or Fiction
One more thought! Ask your lender if they'd be willing to check out LP's response to a combined 110% loan-to-value. This means you would need to part with enough cash to pay down your loan by 1%. It's worth a try!
If they agree, consult your lender for details on how and when to pay down the principal and if a paper-trail will be required.
Good luck with your HARP refinance.
Wishing you the best,
P.S. Per guidelines, combined-loan-to-value should not make or break an approval because CLTV restrictions were lifted in HARP 2.0. So my suggestion of slightly paying down the loan balance is just a shot in the dark. But perhaps it will get your lender thinking outside the box.
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