HARP Refinance – Program Extension

In an effort to attract more eligible borrowers who could benefit from the Home Affordable Refinance Program, the Federal Housing Finance Agency (FHFA) recently announced changes to the HARP Program.

The HARP refinance options are designed to assist Fannie Mae home borrowers who have demonstrated  acceptable payment history on their existing Fannie Mae mortgage loan, but may not have been able to refinance to obtain a lower payment because they are underwater.

Another purpose of HARP is to help homeowners to move their mortgage from a less stable loan program to a more stable loan program. For example – from an adjustable rate mortgage to a fixed rate mortgage.

The First HARP Refinance Modification – Loan To Value

Fannie Mae is removing the maximum LTV ratio limit for Refi Plus mortgage loans secured by fixed-rate mortgages with terms up to 30 years. This includes loans with terms of 15 years, which were previously restricted to a maximum LTV ratio of 105%. There continue to be no limits on the CLTV or HCLTV ratios.

  • The maximum LTV ratio limits for all occupancy and property types are:
  • no maximum for fixed-rate mortgages with terms up to 30 years,
  • 105% for fixed-rate loans with terms greater than 30 years up to 40 years, and
  • 105% for ARMs with initial fixed periods greater than or equal to five years and terms up to 40 years (as permitted by the ARM plan).

HARP Refinance Effective Date

You must apply for the new program after Dec 1, 2011.

New Underwriting Requirements for the HARP Refi Extension

To make the HARP program available to more US homeowners the program underwriting requirements have been expanded to include:

  • Mortgage payment history requirements: you cannot have had any mortgage delinquencies on your existing mortgage in the most recent six month period, and no more than one 30-day delinquency in months 7 – 12.
  • Requalification requirements for large payment increases: A new policy is being introduced that requires the borrower to be requalified for the new loan if there is a large payment increase. The following requirements must be met when the principal and interest payment increases by more than 20% of the current contractually obligated payment under the note:- minimum FICO credit score of 620;
    – maximum DTI ratio of 45%;
    – verification of income sources; and
    – verification of assets to close if the you arerequired to bring funds to closing.

Removal of bankruptcy and foreclosure policy: Fannie Mae is removing the requirement that the borrower (on the new loan) meet the standard waiting period and re-establishment of credit criteria in the Selling Guide following a bankruptcy or foreclosure. The requirement that the original loan must have met the bankruptcy and foreclosure policies in effect at the time the loan was originated is also being removed.

Borrower benefit requirement: To be eligible for Refi Plus and DU Refi Plus, the borrower must receive a benefit in the form of either a reduced monthly mortgage payment (principal and interest) or a more stable product, such as a move to a fixed-rate mortgage from an ARM. Fannie Mae is updating the borrower benefit criteria to also include a reduction in the interest rate or a reduction in the loan amortization term as eligible borrower benefits.