HARP 2 Refinance Program Questions and Answers
by Kelly in Elmhurst, IL, by Lisa, and by Terri in Racine, WI
Getting turned down for HARP 2.0 refinance program? Don't understand loan decisions made by your lender? Ask Kate! Kelly asks why several lenders tell her either Freddie Mac doesn't refinance condos or they aren't willing to take on a mortgage that much underwater. Lisa asks if an escrow shortage can be included in her HARP refinance. Lenders tell Terri her Fannie Mae loan is not eligible for the HARP 2.0 program because PMI is included in her interest rate.
Question 1: HARP 2 Refinance Program for Condo By Kelly
Hello. I 100% qualify for the HARP 2.0 loan. I am about 50k underwater but I have always paid my mortgage on time. My credit score in the low 700's.
I have gone to several lenders who tell me either Freddie Mac doesn't refinance condo's or that they are not willing to take on a mortgage that much under water.
I just went through the entire process with one lender, only to be denied. I am in tears. I can't keep going like this. I am starting to panic.
Is Freddie Mac really backing these loans? Who are the lenders?
***zz-portrait-left.shtml*** Ask Kate answers: HARP 2 Refinance Program for Condo
I feel your frustration but (sadly) the need to roll up your sleeves to dig deeper for a willing HARP 2.0 lender is not uncommon after being denied loan approval.
Even more so, it's especially trying for homeowners who own condominiums. (Sigh)
In a hot market, condominiums sell like hot cakes. But during a cooled-off real estate environment, condo values drop first which often leads to a higher foreclosure rate among mortgage lenders.
That's why you've discovered the response from banks is that they don't want to refinance mortgages for underwater condominiums not currently in their portfolio.
So what should you do? I recommend discussing this with other homeowners in your condominium development. Chances are, if you are $50,000 underwater, many of them are too. Ask who they used for underwater financing and if they'd go back to the same bank again.
Be sure to write down not only the bank's name but the specific originator's contact information also. Often, the originator's ingenuity during a challenging loan process can make or break your mortgage approval.
By the way, you should know that Freddie Mac backed loans and condominium properties are included in the HARP 2 refinance program, regardless of what a few originators may claim. Go here to see the HARP 2.0 loan guidelines
Try not to panic. As trying as it seems, it's normal to apply to more than one lender before getting HARP 2 loan approval. And if you haven't already, contact your current lender. It's possible that you might encounter less resistance with them since they already own the mortgage.
One last thing, getting to the bottom of a loan denial and finding out the underwriter's hot points with your application can help you brainstorm ways to turn a denial into loan approval. Go here to see what I'm talking about: Curing Mortgage Approval Hiccups
Kelly, I wish you the very best,
Question 2: HARP Loan Refinancing with Escrow Account Shortage By Lisa
Hi Kate, Recently found out about the HARP refinance program. We have lived in the house we want to refi for 21 years. We have not had an escrow account until recently when the mortgage company beat us paying taxes. Now we have a escrow shortage and want to know if this shortage can be included in refinance. Thank you.
***zz-portrait-left.shtml*** Ask Kate answers: HARP Loan Refinancing with Escrow Account Shortage
I sympathize. Lender-held escrow account shortages become a pain for homeowners who assumed the lender had calculated a sufficient sum to pay taxes in full.
Getting an additional tax bill is never fun.
You may get lucky with financing the escrow account shortage but I would plan to have enough cash to bring to closing, just to be safe.
I say this because HARP refinance guidelines do not allow any money coming back at closing to homeowners in excess of $250 or 2% of the new loan amount, whichever is less.
Look at this quote from the Making Home Affordable Program:
"Question: Can I get cash out of a HARP refinance to pay other debts? Answer: The Home Affordable Refinance will not return cash to the borrower for the purpose of paying other debts."
I think many lenders will equate paying the escrow shortage to giving you cash-back at closing.
It's often not easy to get straight answers upfront from mortgage professionals about escrow accounts. But I recommend asking for the escrow shortage policy when shopping for lenders.
Here is an excellent idea for comparing lenders: Savvy Shoppers Know how to Compare Refinance Fees
Question 3: Excluded from HARP 2 Refinance Program Due to PMI By Terri
We have a very high interest rate loan 7.75% and are about $80k upside down in value. Our loan is Fannie Mae.
When I inquired about HARP 2 refinance with my current lender, I was told that our particular Fannie Mae loan is not included because the PMI was included in our interest rate.
He says we may qualify with the new changes coming in the first quarter of the year 2013. Is this true? Everything I search seems to point to that we would qualify for refinance under the current program. Have you heard of this? Any advice is appreciated.
***zz-portrait-left.shtml*** Ask Kate answers: Excluded from HARP Loan Due to PMI
The 2 main categories of mortgage insurance affecting homeowners applying for HARP 2 refinances are pretty well known, Borrower Paid Mortgage Insurance (BPMI) and Lender Paid Mortgage Insurance (LPMI).
BPMI gets included in the monthly payment when a mortgage is first originated. Homeowners with BPMI are eligible to apply for HARP 2 loans.
Lenders tack on LPMI by increasing an interest rate. For the most part, mortgages with LPMI are eligible to be refinanced under the HARP 2 plan.
But unfortunately for affected homeowners, a 3rd category of mortgage insurance is causing an understandable stir. Under some circumstances, lenders were required by Fannie Mae and Freddie Mac to provide additional credit enhancements after closing, one of them being mortgage insurance.
Today, the credit enhancements disqualify affected homeowner from refinancing through the HARP 2 program. Ask if this is the case with your loan. If not and you have BPMI or LPMI, contact another lender or two for a 2nd opinion.
I carefully follow breaking news and updates to the Making Home Affordable Program and report them at Kate's Best Mortgage Rate Blog
. So bookmark my blog in your favorites and check back often for national mortgage news and updates to the HARP program.
Perhaps the changes coming early-on in 2013 referred to by your mortgage professional is the HARP 3 proposal initiated by President Obama. Be assured as soon as it becomes a viable program, you will get the details at my blog! Read all about President Obama's proposal for the HARP 3 refinance plan
As a postscript, it's worthwhile to note that the amount of mortgage insurance on a HARP refinance needs only to equal the current level of coverage on an existing home loan.
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