HARP 2 Refinancing Rates

by Redline from Charlotte, North Carolina

Ask Kate about confusing HARP 2.0 mortgage refinancing rates: Hello Kate, I read through a lot of information on your website regarding this program. Currently dealing with a large lender for my primary home. I can't understand a few things. The interest rate they are offering me does not follow any industry trends. I am told that they put my info in the Fannie May system and it spews out all this stuff.


Redline continues... What I find most disturbing is that they are offering me the same rate whether I go with 30yr fixed or 20yr fixed and told me that 15yr fixed is not even an option with HARP2.

In addition to this they are telling me the closing cost would be around $2500.00. For a mortgage they already own? ...does this sound right?

What they have hanging over my head is that according to Fannie May my house is worth $280k and I owe them almost $100k more on the current mortgage.

Basically, they are telling me no one else can refinance my mortgage.

Kate Answers: HARP 2.0 Refinancing Rates

***zz-portrait-left.shtml*** Dear Redline,

When discussing mortgage rates and fees for the HARP 2.0 program, it is important to break them up into two categories.

1) The market price which lenders use to individually set their interest rates. The government does not issue HARP mortgage rates so lenders are free to price as they see fit.

HARP 2.0 Refinancing Rates and LLPA

But there is a second category of fees passed to lenders by Fannie Mae and Freddie Mac.

2) Loan Level Pricing Adjustments (LLPA) increase the cost of refinancing for homeowners, whether expressed in discount points or higher interest rates. LLPAs are charged according to risk factors such as a high loan-to-value (LTV).

Yet Fannie and Freddie have both reduced their pricing adjustments for loan-to-values of 20 years or less for HARP 2 refinancing.

Therefore the mortgage rates for a 15 or 20 year HARP term could potentially be lower than rates for traditional refinancing.

Why would this be? Simple. The Making Home Affordable Program encourages shorter amortization terms, allowing borrowers to build equity in their homes and pay off their mortgages more quickly.

Think of the reduction in pricing adjustment fees as a reward!

See LLPA details at my original New HARP 2 Loan Announcement - Mortgage Rates.

Does the HARP 2.0 Plan Offer 15 Year Terms?

In November 2011, Fannie Mae announced:
"Fannie Mae is removing the maximum LTV ratio limit under the HARP program for mortgage loans secured by fixed-rate mortgages with terms up to 30 years. This includes loans with terms of 15 years, which were previously restricted to a maximum LTV ratio of 105 percent."

Can't argue with Fannie! So you can return to your loan servicer with confidence saying, "Yes, HARP DOES offer a 15 year term."

Demonstrating even more flexibility, Freddie Mac will buy loans in increments of one year, for example, a 27 year term (under 30 year pricing). This helps a homeowner who is 3 years into their existing home loan and wants to maintain the identical pay-off date.

Frankly, I am growing weary of bankers who cannot adequately or accurately explain their decisions based on automated underwriting. My answer to them is simple. Don't use the software if you don't understand it because homeowners are owed an explanation IN WRITING! It's the law.

Compare HARP 2.0 Closing Costs

You asked why your loan servicer quoted HARP mortgage rates unlike those currently offered by other lending institutions?

You might notice this among lenders inundated with HARP applications, reducing their need to compete for your business. One way to combat this is to walk away and shop for another lender. Something to consider!

Keep in mind, the market environment contributes to the price of mortgage rates. But systematic interest rate shopping should bear this out. (By the way, follow that link because I just added an easy way to find detailed information on individual bankers, brokers, and companies you may be contemplating.)

One last thought! Under most circumstances, you are not confined to using your loan servicer. That is the whole point of the HARP 2.0 plan! If your loan servicer tries to bully you into believing you are limited to using them, you may have discovered another reason to walk away.

Good luck and best wishes,

P.S. It is hard for me to comment on the total closing costs because qualifying factors add to the picture. On top of that, the definition of closing costs differs in the market place.

Some use it to describe origination fees. Others include 3rd party fees such as title insurance, while other lenders throw the whole kit-and-caboodle of recurring closing costs into the bottom line.

In the end, it comes down to comparison shopping and what you are willing to pay for refinancing. Go to Understanding Mortgage Closing Costs for more help on the different categories of fees.


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HARP Loan and Credit Scores
by: Nancy from Sacramento, California

Wells Fargo is quoting interest rate of 4.5% and New American Funding 3.75% - Why the big difference? Both were for 30 year HARP loans under Fannie Mae.

Also, before we realized we were eligible for a HARP loan on our primary residence, we decided to try to short sale our rental and didn't make the July payment. We are 30 days late on the rental mortgage but could possibly catch up before it goes 60 days late.

What is the affect on our HARP loan if we have a 30 day late on the rental? What is the affect on the HARP loan if we continue down the path of not paying on the rental?

Hi Nancy, Kate here. The government does not set the HARP rate. Each lender sets their own. I suggest getting a good faith estimate from both lenders. You may find the second lender is charging more in fees to offer a lower rate. Learn how to compare mortgage closing costs here.

While HARP guidelines say there is no minimum credit score, automated underwriting software is likely going to take scores into consideration as another piece to the approval puzzle. Unfortunately, late mortgage payments lower credit scores, 60 day late payments even more than 30 day.

This is not to say you won't be approved. But the only way to know is to apply for HARP mortgage and see if you get approval.

Keep in mind, many if not most banks run credit again before closing the mortgage process. If you are initially approved with a 30 day late, a 60 day late may not be acceptable to the lender before closing.

Best wishes for your HARP loan and short sale,

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You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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