HARP Guidelines Allow for 125% LTV. Originators Still Skeptical

HUD Secretary Shaun Donovan today announced that the Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to raise the Home Affordable Refinance Program's (HARP) loan to value (LTV) ceiling from 105% to 125%.

The Home Affordable Refinance Program was designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae or Freddie Mac owned mortgage loan. Unfortunately due to rising unemployment levels and increasing foreclosure rates, demand for housing has weakened and property values have continued to decline, which has blocked many borrowers from utilizing HARP.

The expansion of Fannie Mae's and Freddie Mac's LTV guideline aims to expand qualified homeowner's refinance opportunities. The underlying initiative is that lower monthly mortgage payments will raise real household incomes and therefore afford more spending power upon consumers. In a government press releases, Treasury Secretary Tim Geithner stated…

“By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery.”

Thus far the effectiveness of the HARP program has faced many barriers. Among these roadblocks: lenders adding underwriting overlays and guideline restrictions, lenders all together not participating in the program, difficulty determining if Fannie Mae/Freddie Mac own your mortgage because of addresses not exactly matching the original note, additional costs because of lender imposed risk based loan level price adjustments (on top of GSE LLPAs), the unwillingness of banks to subordinate second mortgages, reluctant mortgage insurers, and the Home Valuation Code of Conduct.

Kent Mikkola, a mortgage consultant from Roseville, Minnesota says “Overall, it is difficult to obtain a HARP approval. Furthermore,  it is even more difficult to find out why a seemingly eligible borrower has been denied”

Since the program was launched on April 1,2009 several updates have been made to counteract these roadblocks, however HARP remains unable to live up to the hype surrounding it. That said, today's announcement, although appreciated, was broadly overlooked by skeptical mortgage professionals. John Rodgers, president of Prime Mortgage Lending in Apex, North Carolina, had this to say:

“It appears that the Obama Administration is aware of the constraints blocking borrowers from lower mortgage payments. Unfortunately, today's update will likely prove ineffective in lowering those barriers. At this point granting appraisal waivers, allowing reduced documentation, and cutting loan level price adjusters appear to be the only way HARP will ever be effective. Otherwise HARP will turn out to be yet another loan program nobody can use, much like like FHA Secure and the Hope for Homeowners program.”

Nonetheless, borrowers who are in trouble with their mortgage should find out if they are eligible for a refinance or loan modification. You can do so HERE

RESOURCES

Making Homes Affordable Homepage

Fannie Mae HARP Homepage

Fannie Mae Loan Look Up

Borrower FAQ

Lender FAQ

Fannie Mae Press Releases

Fannie Mae Loan Level Price Adjustments Table

Freddie Mac HARP Homepage

Freddic Mac Loan Look Up

Freddie Mac Information for Lenders

Freddie Mac Information for Borrowers

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