HARP 3 Refi and FHA Loan Limits

by Dave C. from Santa Clarita, California

Ask Kate how my HARP 3 refi will be impacted by FHA loan limits: Hi Kate, a previous questioner asked you a specific question about the loan limit for the potential Harp 3 program. I believe you inadvertently failed to completely answer the question. You indicated that, according to the White House, the loan amount limit would be governed by the current FHA limit in your area (in my case Los Angeles which is $625,000).

Dave continues... The previous question, however, had two parts the first, what would be the limit (in this instance $625,000) but the second part of the question was whether that limit would be based on the original loan amount or the current amount owed on the loan.

HARP 3 Refinancing Proposal
For example, I took out a jumbo 1st loan from Wells Fargo in 2007 for $647,000. Assume I currently owe $600,000.

Would I potentially be eligible for a Harp 3 because my 1st loan is presently below $625,000 or would I be ineligible because my original loan amount in 2007 was above $625,000?

Dave C.

Kate Answers: HARP 3 Refi and FHA Loan Limits

Ask Kate at Get-Your-Best-Mortgage-Rate.com

Dear Dave,

Thank you for bringing the unanswered portion of the HARP 3 refinance question to my attention. But first I need to make sure everyone understands that HARP 3 remains in the proposal stage.

It's talked about, re-proposed, and hashed over once again. But as of October 2012, this refinance plan for underwater mortgages has never made it out of the gate.

But that's not to say HARP 3 won't become a robust, full functioning loan program helping eligible homeowners without equity take advantage of today's magnificently low mortgage rates.

Maximum Loan Amounts for HARP 3

But back to your question. First of all, maximum loan limits for FHA home loans vary from county to county. For example, you mentioned the maximum FHA loan amount in your county is $625,000.

So assuming the HARP 3 refinance proposal passes and utilizes FHA loan limits, you cannot borrow more than $625,000 regardless of your original loan amount or the amount you owe today.

Case in point, Oregon's Senator Jeff Merkley proposed in his "RAH - Rebuilding American Homeownership" that the shell of the misunderstood and little-used Making Home Affordable's FHA Short Refinance could be used for implementing HARP 3.

Keeping this in mind, the Making Home Affordable website says a homeowner may be eligible for the FHA Short Refinance if:
"You are eligible for the new loan under standard FHA underwriting requirements."
Therefore, we could conclude that the amount to be borrowed could not exceed maximum FHA loan limits.

Read More about HARP 3 Proposals

But truly, this is a moot point since HARP 3 is still a proposal with no concrete guidelines to rely upon. So read more about HARP 3... ...and then write your elected officials on state and federal levels with requests and demands, whatever it takes, to enact a useful plan to help homeowners struggling without equity to refinance their underwater mortgages.

Thanks again, Dave, for bringing this to my attention. I also want to emphasize once more that HARP 3 is only a proposed plan with no set-in-stone guidelines as of October 2012.

Best wishes,

Ask Kate

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