HARP Refi Denial: Can I Switch Lenders

by Vanessa in Alexandria, IN, by Tina in Chandler, AZ, by Will in Philadelphia, PA

Ask Kate if the HARP refi program allows borrowers to switch lenders after a loan denial: Vanessa asks if she is restricted to using her current mortgage lender after they turned down her application for a HARP refinance.


Tina asks if she could lose her primary home or truck if she defaults on a HARP loan for her rental property. Will wants to know the number of times someone can refinance under the HARP program. See the comment section (below) for my answers to Tina and Will.

Ask Kate: Can I Switch Mortgage Lenders After HARP Refi and HAMP Modification Denial

By Vanessa from Alexandria, IN

Can I Switch Mortgage Lenders After HARP Refi Denial
Kate,

I have been declined for both programs, HARP refinance and HAMP loan modification. I'm being told I can only apply to my mortgage company. Why is that?

This is my main residence, my co-borrower past away, hence less income. I have owned it for 20 plus years. I have good credit and no other debt. Plus I'm self employed.

HARP was denied because I inherited a separate property. HAMP was denied because of low income. My mortgage company has included property taxes with the monthly payment which has made it double. And my interest rate is 9.25 percent!

Please help me understand why I can only apply to my mortgage company for these 2 programs. Plus what are my other options?

Thanks in advance, Vanessa

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: Can I Switch Mortgage Lenders After HARP Refi and HAMP Modification Denial

Hi Vanessa,

HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program) are two different animals. One program allows borrowers to choose from participating lenders. The other program restricts borrowers to their current loan servicers.

Who Uses the HARP Refinance Program


HARP is geared toward borrowers with negative equity (underwater) who cannot take advantage of traditional refinancing to lower their interest rate. Note that HARP is also available to homeowners with equity up to 20 percent.

Almost without exception, borrowers are not boxed into using their current loan servicers for the HARP program. They are free to shop among participating lenders to compare mortgage rates, closing costs, and loan terms.

But note that all mortgage lenders are not created equal. See Infuriating Lender Overlays vs HARP 2 Program Guidelines for more details.

Who Uses the HAMP Loan Modification Program


HAMP is designed to meet the needs of homeowners who are struggling to make their house payments. Generally an economic or medical hardship has bruised the credit history, making refinancing unobtainable. So instead of a refi, the terms of the current mortgage are modified to create a lower payment.

Often a principal reduction or forbearance is included in the modified terms to reduce the monthly payment. See Mortgage News: Principal Reduction Program for Fannie Mae and Freddie Mac Loans for the differences between the principal reductions and principal forbearances.

Unlike HARP, borrowers are restricted to using their current lenders to modify mortgage loans. See New HAMP Incentives Benefit Homeowners Big Time for more details on incentives.

Additional Making Home Affordable Options


Making Home Affordable (MHA) was created to address the U.S. housing crisis. At least 13 options were created to bring hope to struggling homeowners unable to afford their mortgage payments and to homeowners with underwater mortgages. Go to Special Edition Making Home Affordable Options for an overview of the options.

After perusing your options, call a free MHA counselor to ask them to look into the HAMP denial due to low income. I also suggest giving them the details on the inherited property in relation to the HARP denial. The contact information for the counselors is found at another Ask Kate question and answer... Free Making Home Affordable Housing Counselors.

Property Taxes in Mortgage Payments


You mentioned that your mortgage company doubled your house payment by adding property taxes into the monthly sum. This is a loan requirement for HAMP and often HARP.

Keep in mind that the approximate amount you currently pay in county property taxes has been divided by 12 (months). Instead of you paying taxes directly to the county, 1/12th will now be added to each of your monthly mortgage payments. The lender will form an escrow account to hold your taxes until they are sent annually or semi-annually to the county.

So although your house payment has gone up, you will not be making a large tax payment directly to the county. In fact, the bottom line on your budget should remain about the same.

You are not the only one to ask this question. Read more about paying property taxes and homeowners insurance at Monthly Payments on Mortgage Out of Control.

Best wishes,

Ask Kate

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Limits to HARP Refinancing
by: Will from Philadelphia, PA

Are there limits to the number of times someone can refinance under the HARP program?

Hi Will, Kate here...

If your mortgage was previously refinanced under the HARP program, the property is no longer eligible for another HARP refi. However, borrowers can be granted more than one HARP loan, assuming they have more than one eligible property.

Please note there is an exception to the rule of one HARP loan per eligible property. If your mortgage is a Fannie Mae loan and was HARP refinanced between March and May 2009, it is eligible for another HARP refi.

For other eligibility requirements, go to New HARP 2 Loan Announcement.

Best wishes, Kate

Cross collateralization on HARP refinance program with Wells Fargo
by: Tina K. from Chandler, AZ

Have you heard of the terms cross collateralization or cross default?

I refinanced my primary home with Wells Fargo through HARP in 2014 for a lower interest rate. I have a rental property that is underwater, and now am unable to pay that mortgage. This loan is also with Wells Fargo.

The rental was a purchase money loan bought in 2006, never been refinanced. Wells Fargo says that the rental is also HARP eligible for refinance. But I would still be unable to keep up the payments in the long term.

To my understanding, both my primary and rental are Fannie Mae and are being serviced by Wells Fargo. Coincidentally, our truck which was bought through a dealership is also financed with Wells Fargo.

Now to the questions:

1. If I foreclose on the rental, can Wells Fargo foreclose on my primary that I'm current on, and/or reposess my truck that I'm current on? Should I start to move my truck loan to another bank before my credit takes a hit?

2. Are HARP refinances ever cross collateralized? AZ has an anti-deficiency law and the rental meets the criteria.

Hi Tina, Kate here...

Great questions! The answers are most likely contained in your lender's final loan disclosures, documents, and riders that you signed at closing.

But because the paperwork is crafted by an army of attorneys, I suggest you also consult an attorney if you remain unsure of the risks. Perhaps you can find a law firm that offers, in writing, one free session.

Another homeowner also asked me about cross collateralization. You can read my answer at How Does Streamline Refinancing Work.

Best wishes, Kate

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