From the latimes.com:
The most ambitious federal mortgage program to date aimed at millions of underwater homeowners is poised to take off in the coming two weeks, yet some key issues could hinder borrower participation. One of them involves something most owners know nothing about: Who was your mortgage insurer on your underwater loan?
Though it was announced by the Obama administration late last year, “HARP 2.0” — the second version of the Home Affordable Refinance Program — will finally hit full stride around the middle of this month, when Fannie Mae and Freddie Mac finish tweaking their automated underwriting systems to accept applications, and lenders and mortgage insurance companies start handling large volumes of requests.
The revisions are crucial for owners who have outstanding mortgage balances in excess of 125% of the current resale values of their homes. Under the second version of HARP, there is no upper limit on permissible loan-to-value ratios (LTVs). You can owe twice or even three times the value of your home and still qualify for a refinancing at today’s low interest rates. The earlier version imposed a limit of 125%, which cut out millions of the hardest-hit victims of the real estate bust.
The latest HARP also comes with streamlined underwriting — no requirement for physical appraisals in many cases, speedy processing and elimination of some of the deal-breaker fees imposed by Fannie Mae and Freddie Mac in recent years.
The objective, federal officials say, is to get it right this time around by removing the previous obstacles to widespread participation by lenders and severely underwater borrowers. Industry studies estimate that as many as 6.9 million loans could fit the broad requirements for refinancing, but that far fewer — around 2 million borrowers — are likely to qualify on all the detailed eligibility criteria.
Among the key rules:
• Only loans owned or guaranteed by Fannie Mae and Freddie Mac are eligible. Underwater borrowers who have FHA, VA or other types of mortgages are not. Both companies’ websites — http://www.fanniemae.com and http://www.freddiemac.com — offer “look up” features that tell you whether they own your loan.
• Your mortgage must have been purchased or securitized by either company no later than May 31, 2009, and must have an LTV ratio in excess of 80%.
• You must be current on your loan with no 30-day late payments during the six months preceding application and no more than one late payment during the last 12 months.
If you think you qualify, you can apply to your mortgage servicer and ask how to proceed. Once the fully automated program gets going in a couple of weeks and if your LTV is higher than 125%, you should also be able to shop around among other lenders who are large enough to run servicing operations of their own.
But be aware of a little-noticed glitch that has arisen in the program that could hamper your opportunity to refinance. Some lenders may not want to proceed with your application solely because of a detail buried in your loan documents that was always beyond your control — the name of the mortgage insurer on your current loan. If it is United Guaranty Corp., they may set your application aside because that firm alone has not agreed to adhere fully to the streamlined procedures other insurers accepted as part of the basic deal with the White House, Fannie and Freddie to kick-start the revised refi program.
The issue is technical and complicated — United Guaranty has refused to waive its rights to force lenders to repurchase what it considers badly underwritten loans, and is requiring additional underwriting in some cases. All other private mortgage insurers have waived their rights. The net effect of United Guaranty’s policy, say lenders and federal officials, is to disrupt the intended fast and efficient processing of HARP refi applications — potentially denying lower interest rates to as many as 10% to 15% of underwater borrowers who might otherwise qualify.
Some major lenders, such as Quicken Loans, said in interviews that they will have to either set aside or reject HARP applications if the original loan carries United Guaranty insurance. United Guaranty, a subsidiary of giant insurer AIG, said in an email that it “fully supports the Obama administration’s efforts” in revising HARP, and that only a “minority” of its insured mortgages should be affected by its policy disagreement with the rest of the industry.
Bottom line for you if you’re deeply underwater and interested in a HARP refi: Proceed with your application anyway, but be aware there are tripwires and snares that could derail you.
Boom-Era Property Speculators to Get Foreclosure Aid
The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble.
Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long as they rent out each house or have plans to fill them, under the revamped Home Affordable Modification Program, also known as HAMP, according to Timothy Massad, the Treasury’s assistant secretary for financial stability. The program pays banks to reduce monthly payments by cutting interest rates, stretching terms, and forgiving principal.
http://www.bloomberg.com/news/2012-03-05/boom-era-property-speculators-to-get-foreclosure-aid-mortgages.html
Stick that in your pipe and smoke it.
Just when you think they might be running out of fixes, now they are going to bail out landlords too?
I think reader anon was right yesterday that the underwaters primarily want to max out the free rent, and when done will move on, rather than bother with a lower rate.
While a loan-mod sounds good, actually getting one that provides enough extra benefit has to be elusive.
Bank of America filed a foreclosure lawsuit against the mayor of North Miami, who said he hadn’t made payments because he’s underwater on his mortgage, according to the South Florida Business Journal.
Andre Pierre said he tried to negotiate a loan modification on the 2,495-square-foot home, less than a year after he modified it at $432,538.
The mayor and his wife, Bernadette, purchased the house for $353,000 in 2003.
http://www.bizjournals.com/southflorida/blog/2012/03/north-miami-mayor-pierre-hit-with-home.html?ed=2012-03-02&s=article_du&ana=e_du_pub&page=all
I have already talked to one of the servicers of my investment loans and because the LTV is higher than 80 percent now, they will do a HARP refi on the one they service. None of the other servicers have ramped up to do investment properties yet.
All this really does for investors is help them to refinance properties with LTV’s of greater than 80 percent at current investment property loan terms. It is very helpful to investors that have been shut out of refinancing because of the Fannie/Freddie loan limits and are in this situation. Investors that, like owner occupants, might otherwise walk away can hold on until the market recovers.
If Fannie and Freddie would just drop the loan limits, investors with multiple properties could take advantage of the investment property financing available to everyone else, even if the LTV’s are less than 80 percent. Maintenance and capital improvements that have been deferred get done when the cash flow improves. More money flows into the economy and the condition of the rental stock improves. Refinancing rentals at current market rates benefits everyone.
Loan limits = 10 loans per investor.
Harp 2.0 is going to be another failure in my humble opinion. More distortions are going to come into play and further increase the price of housing.
The market is still battling high unemployment, rampant foreclosures in some areas, weak consumer confidence and tight lending standards.
Prices will fall another 5% to 10%, says IHS Global Insight economist Patrick Newport.
HARP 2.0 is the first thing I have seen that might actually help a significant number of folks. Just refinance everyone at current market rates for their specific situation and you will take a lot of pressure off. Those that are still in way over their heads can short-sell and be done.
The dearth of foreclosures in Phoenix has already depleted the inventory and is driving prices higher. Employment has improved and the restaurants are busy. Builders have started building again and are raising prices and/or cutting incentives. Refinancing and orderly liquidation through short sales may be all that’s needed to shift the market.
Loan number limits may not apply under HARP 2.0, at least that’s not how one servicer interprets the new rules. The proof is in the closing, however. Once the loan funds, we will know for sure.
Just got an e-mail back from a second lender stating the guidelines have no limit to the number of properties. The product will be released two weeks from today.
I think some of the servicers that have been obfuscating and foot-dragging will now have to get on board.
Is a housing market really healthy if the gubmint feels it necessary to continue supporting it ?
“Refinancing rentals at current market rates benefits everyone.”
Everybody except the fixed income investors holding the Mortgage Backed Securities. You’re rewarding one group of investors (People with rental properties) and sacrificing another (Fixed income investors, i.e. pension funds). Maybe that is better for the economy right now, but it comes with a long term cost. What do we do down the road when those pension funds are underfunded because they can only collect 3% instead of 6%.
I think a better solution would be to offer everybody refinancing into a variable rate. We help you out now but if the economy improves and rate go up the income investor gets rewarded in the future. Share the reward if lower rate financing does improve the economy.
Pension funds are well versed in portfolio structure. When the returns from one asset class go down, they reallocate. The trouble for them is less related to declining MBS yields than to overly rosy actuarial projections based on 10 percent stock market returns that turned out not to be sustainable in a post-economic expansion environment.
Market loan rates are determined by….the market! I’m not saying we should give anyone below market rates. If you don’t refinance folks at market rates, the pre-payment risk is very high anyway. People will sell and move into more profitable investments, further depressing housing prices and extending the recovery. Weaker hands will fold with the same effect.
Non-GSE paper will have to be held, written down, or sold. Stuff happens, investors lose as well as win. That’s why it’s called risk capital. The market will work through it.
Giving GSE property to your Wall Street buddies is a lot more destructive than refinancing. Clear the market through offering GSE properties at retail with market rate financing, refinancing anything reasonable to the market rate and terms, and forcing the weakest hands to short sell or go to foreclosure. Problem (finally) solved!
“Market loan rates are determined by….the market! I’m not saying we should give anyone below market rates.”
We wouldn’t need the government to intervene at all if the market was willing to offer 4% rates at LTVs > 100%. The reality is the market won’t offer those rates unless you have a lower LTV or the government backstops those loans. The government is saying give people secured market rate loans and we promise to cover any loses.
Let’s just let the market decide the winners and losers instead of the government. Obviously there are buyers out there that would love to buy distressed product, but there’ just not enough out there.
It seems that many opponents to the HARP Deal 2.0 do not understand that this is not “just another bailout” for people looking for a free ride.
Not only did the existing loan need to have been closed prior to 6/1/2009, you need to be current on the mortgage, and 0x30 in the last 12 months for Fannie (1×30 allowed in months 7-12 for Freddie).
Income documentation is required, and Fannie/Freddie guidelines re: bankruptcy, foreclosure, etc, still apply.
I have several people in the pipeline right now that will benefit from the HARP Deal 2.0. In fact, a couple of them are going to lower their payments by over $400 per month, thereby making it easier for them to stay in their homes, improve their homes, etc.
By the way, FHA and VA both offer the no appraisal refinance as well for underwater homeowners. And they have offered these for years and years.
9.Is a housing market really healthy if the gubmint feels it necessary to continue supporting it ?
sdduuuude | March 5th, 2012 at 10:19 am
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This.
Anyone thinking about buying a house today really need to ask themselves this question.
All these prop-ups do is set us up for another housing market downturn.
This one might actually help, especially in preventing the strategic defaults. I know several high income folks who simply bought at the wrong time. Unlike their lower income counterpart, these guys have stuck around and kept up with their payments. I have to wonder if the thought of strategic default come to mind every time another friend or acquaintance get to refi to the latest low rate.
And no, of course the market is not healthy. But we have chosen our path of slow and gradual suffering and speedy inflation to evntually mask the lost value. hARP 2 is very much in line with this goal
Trading a tight noose that you can escape for a loose chain that you cannot — such a deal.
If you ask most Americans they would prefer the loose chain.
HARP 2 – Tough for self employed people with equity and little net income.
No HARP 2 – Tough for people with 80 ltv
Yes & No HARP 2 – Tough for which MI people – Lender Paid, MIP, TAMI?
HARP 2 – Can I refi out of a 5/1 ARM I/O
HARP 2 – Lender Overlays
All these prop-ups do is set us up for another housing market downturn.
For those who insist on making comments like that, can you expand on it please? Tell us why you think that, or provide some data.
I only know around here, but all I see around NSDCC are buyers using big down payments or all-cash with intentions on staying forever.
The few people who get some gov assistance are far out-numbered by the strong hands.
It will still be a shaky 5-10 years, but after that it should be solid – unless some nutty banker starts up with the ez-qual loans again. If that happens, buy everything in sight.
United Guaranty says that they are working with Harp 2.0, so why would Quicken and others turn me down because I have them for PMI? No late payments, my condo turned into a rental and it’s interet only. Is there any hope?
I am in the same boat Trisha… Qualify for every aspect of Harp 2.0 except mortgage insurance is United Guaranty and Quicken rejected me. I’m getting pretty tired of being one of the “losers” in these programs when I’ve followed everything I needed to, and done everything I can to avoid a more drastic (e.g. foreclosure, short sale) move. A pox on United Guaranty and Quicken Loans!