Playing the HARP

Most of you have heard about the new revision made to the HARP Program but just in case here is a brief overview because I am on the fence about this one. HARP is an acronym for (Home Affordable Refinance Program) this was instituted by President Obama about 2 years ago.  It has done very little in terms of helping potential borrowers that are underwater on their mortgage. Basically if you remained current on your mortgage payment but lost significant equity due to the housing downturn and your loan was backed by Freddie Mac or Fannie Mae you could apply for a lower interest rate through the government and if you qualified you were able to keep your home and pay a lower monthly mortgage amount.  Now a second round of HARP has been put into motion and it has the following revisons:

This revision will try to achieve the following:

 1) Help 1.6 million borrowers refinance into a lower rate and be able to keep their home by December 2013.  To date approximately 894,000 borrowers have used the prior HARP standards. These borrowers had less than 20% equity in their homes.


 2) This revision applies to all loans backed by Fannie and Freddie Mac - Keep in mind that your loan must be under one of these institutions.  Check the status of your loan to see if you or someone you know can qualify

3) This revision will include borrowers that owe more than 125% of their homes value - This will take effect in the spring of 2012

 4) Appraisals and underwriting requirements to be less stringent - Currently a major hurdle is the appraisal process.  Many homes are getting a second or third appraisal because they are coming in lower than the anticipated price.  This can be an additional $1,000 out of the prospective borrowers pocketbook.  In addition to the appraisal is the underwriting process.  This can be painful for borrowers because many mortgage originators shy away from difficult borrowers because Fannie and Freddie Mac can force a lender to buy back a loan if underwriting flaws emerge. In response to that lenders are asking for extra documentation of incomes and scrutinizing every detail on the credit report, these extra steps lead to more costs and more denials of loans being processed. 

5) Loan fees will drop and possibly waived for borrowers who reduce their loan term - This is a nice bonus for borrowers.  If you use the HARP standards and have a 30 year fixed mortgage and then refinance into a 15 year or 10 year mortgage your origination fees could be waived.  That could save you up to $2,000 on your refinance.

Other tidbits about the mortgage industry that I thought were worth mentioning:

1) Core Logic a company that tracks 85% of all mortgages in the US, estimates that 20 million borrowers with equity in their homes could cut the interest rates on their loans by more than one percentage point if they could refinance.  Thats about a quarter of all the homeowners in the US.

2) Unfortunately, a refinance is treated like a brand new loan, refinancing is nearly impossible for another 8 million borrowers whose homes are worth less than their current mortgage unless they qualify for HARP

3) Goldman Sachs estimates that if current borrowers with a 30 year fixed rate loan backed by Fannie Mae or Freddie Mac were to refinance, they would save $24 billion annually.

4) According to Lender Processing Services a (publicly traded company), the mortgages currently entering the foreclosure process have been delinquent an average of 611 days.

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