HARP 3.0 Fact or Fiction
by Nona from Eagle, Idaho, USA
Ask Kate if HARP 3.0 is fact or fiction: Kate, have you heard if HARP 3.0 will apply to portfolio lenders such as Washington Federal and Zions Bank? When can we expect more details on the next phase of the Making Home Affordable Refinance Program?
Kate Answers: HARP 3.0 Fact or Fiction
Dear Nona, Wouldn't it be nice to have a plan for the underwater mortgages that are NOT backed by Fannie Mae or Freddie Mac!
First a little background. HARP is a refinance program created by Making Home Affordable.
This streamlined plan by the Obama Administration is for homeowners who need affordable mortgage payments but lack the equity required by traditional refinancing.
But here's the fly in the ointment. Only mortgages backed by government sponsored entities (GSE) Fannie Mae and Freddie Mac can take advantage of Making Home Affordable refinancing.
What about the Americans with non-GSE home loans? Right now, they are left out in the cold.
Blueprint for an America Built to Last
It all began during the January, 2012 State of the Union Address by President Obama, Blueprint for an America Built to Last
You may remember afterward, the underwater mortgage program announcement was being called the Proposed Obama Refinance Plan
Since then, it has evolved into HARP 3.0, being modeled after the new HARP 2.0 loan
. However, without Congressional approval making it law, it remains unable to help homeowners with non-GSE loans.
Although proposed by President Obama, no concrete terms or expected dates of release are made known to the public.
It is worth noting that the proposed HARP 3 is akin to the FHA Short Refinance program which has never gained momentum. Contrary to the name, the FHA Short Refinance option
is NOT for homeowners with a current FHA loan, neither specifically for mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
Is Another Program for Underwater Mortgages Really Necessary
Streamlined broad based refinancing under HARP 3.0 would extend opportunities to homeowners whose mortgages are not backed by Fannie Mae or Freddie Mac. How important is this?
Many homeowners meet HARP initial eligibility
and satisfy the borrower benefit provision
with one big exception. Their underwater mortgages are not backed by Fannie Mae or Freddie Mac.
How did this happen? Although today Fannie Mae, Freddie Mac, and FHA lending is the norm, they had gradually given up a portion of their market share to non-GSE alternatives starting in the mid 90s until early 2007.
Although many of the non-GSE loans were underwritten with Fannie Mae guidelines, these Alt-A and jumbo loans are not eligible for refinancing under the MHA plan today because they were never purchased (nor intended to be) by the mortgage giant.Subprime mortgage lending
, responding to a robust real estate market during the last decade, also created many non-GSE loans which are not eligible today for Making Home Affordable refinancing.
In fact, it is estimated that 11 million homeowners have underwater mortgages, yet only 4 million of those are Fannie and Freddie financing. Then compare that number to the 900,000 who successfully refinanced under Making Home Affordable Refinance Program from 2009 to September 2011. Now
you understand why broad based refinancing reform is necessary as proposed by President Obama.
Take Action to Get Results
Will lenders such as Washington Federal and Zions Bank participate in HARP 3.0? It's anyone's guess! The plan is still in the proposal state.
So keep checking back. I will keep everyone updated on the proposed Obama Refinancing Plan as well as other breaking homeowner news at my Mortgage Blog
One more thing. Write your representatives in Congress. Let them know you are waiting for them to take action and make broad based refinancing a reality for millions of American homeowners.
Good luck and best wishes to everyone,
P.S. For proposed details and qualifying criteria, go to Streamline Obama Refinance Plan
here on my website.
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