This week Fannie Mae and Freddie Mac released the new revised guidelines for HARP II. HARP is the Home Affordable Refinance Program that was started in April 2009. Last month the government announced changes to the program and they were issued formally on November 15, 2011. Most of the changes go into effect after December 1, 2011 and some won't start until after January 2012.
The most important part of the program is that your mortgage must be held by Fannie Mae or Freddie Mac. Both have websites that have a property lookup program so you can see if your home qualifies. FHA and VA loans do not qualify for the program, but both of those programs have their own streamline refinance programs.
Your loan must have been sold to Fannie or Freddie prior to June 9, 2009. Your loan must be in good standing, you may not have more than one 30 day late in the last twelve months. This is not a program designed to stop or delay foreclosures.
The biggest change with the new rules is that there is not a loan to value limit. In the past, the maximum loan to value was 125%, however many banks would not go over 95-105%. We do not know how the investors are going to look at these new rules yet, but Fannie and Freddie will allow an unlimited loan to value.
Another change is the requirement of a minimum credit score of 620 and if the new payment increases by more than 20%, there is a maximum debt to income limit of 45%.
There must be a benefit to the borrower in the form of a reduced monthly payment or a more stable product (such as a move from a adjustable rate program to a fixed rate program).
You can refinance second homes and investment properties under the HARP program.
If you are currently not paying mortgage insurance and your value has dropped so you are now over 80% LTV, you will not have to pay mortgage insurance with the HARP program. If you are currently paying mortgage insurance, the mortgage insurance company will have to re-issue the MI. We have not heard from any of the investors to see if they will allow that going forward. In the past, mortgages that had MI had a very difficult time refinancing through HARP as the investors would not allow you to refinance the mortgages that had mortgage insurance.
If your loan has lender paid mortgage insurance, you are not eligible for the HARP refinance.
You do not have to use your current lender to refinance your mortgage, you can shop around to get the best interest rate possible.
We do not know what individual investors are going to require yet. Fannie and Freddie just issued the new guidelines this week and each bank (investor) will be issuing their own guidelines or overlays on the program. For example in the past, Fannie and Freddie allowed up to 125% LTV, but very few investors would allow that. Most capped the LTV at 105% or less. So until we hear from different investors, we are not sure what we will be allowed to do on the new programs. As I hear more, I will update the information! Remember this is for loan applications after December 1, 2011 and some changes won't be effective until January 2012.
