The HARP 2.0 Mortgage Program
For the better part of this past year, Florida mortgage rates have been at or near record lows. This said, many Florida homeowners who need to refinance their homes down to better interest rates have been unable to do so because of declining values and limited equity.
We are now funding HARP 2.0 Loans!*
Unlimited LTV/CLTV on Owner-Occupied and 2nd Homes! (With OR Without Mortgage Insurance!
*Minimum 700 FICO Required
*Fannie Mae Loans Only at This Time for higher than 125% LTV
The fact is that many homes in Florida have suffered massive valuation decreases - some by as much as half of what they were worth when purchased. The result of his devaluation is that a lot of homeowners in Florida owe more on their mortgages than their homes are presently worth. This puts them in a status mortgage loan officers and finance professionals call being “upside down” or “under water.” HARP 2.0 will help alleviate this situation.
Another problem Florida homeowners today face is that they require more to refinance their home than their homes are worth. This puts them in a poor Loan to Value (LTV) situation. Under typical mortgage refinancing rules, high LTV ratios result in unapproved mortgage applications. The wonderful news for you if you fall into this category is that HARP 2.0 does not have LTV limitations!
In response to this situation, the government revised its current Home Affordable Refinance Program (HARP). HARP was designed to allow homeowners with little to no home equity to refinance into lower mortgage rates. HARP loans are available to borrowers with LTVs of as much as 125 percent, although the maximum LTV it varies by lender.
A Little History About the HARP Program
The initial iteration of the HARP program took place about two years ago. Even in its first form, the program was not meant to save the homes of those unable to pay their mortgage. The goal of the HARP program was and continues to be helping homeowners who are still eligible for mortgages using traditional credit and income guidelines. The hitch was that these folks who were current on their mortgage, had great credit, and were bringing in solid income were still not qualifying due to the first HARP programs’ LTV parameters. They simply owed much more than current appraisals showed their homes were worth. Here’s what would happen:
A mortgage borrower in Florida bought a home five years ago at 6 percent interest with 20 percent down. If your home’s initial value was $100,000 and you borrowed $80,000 – your LTV was 80 percent.
Now – rates right now are around 4 percent, which means dropping from 6 percent to 4 percent is great. The problem is that appraisals on your home today show that even with your initial 20 percent down equity position, your home is worth much less than it was previously. What you have is a Florida mortgage balance sitting at 100% or more in loan to value. In short – you came into the home with a 20 percent equity position and now you owe more than the home is worth. You are upside down in your mortgage.
The original HARP program was meant to help these people out. However, the program was largely unsuccessful. It only assisted about 800,000 homeowners in total. This was largely because of the red tape existing between first and second mortgage companies, high fees charged by Fannie Mae and Freddie Mac, and a good number of big banks not willing to participate in the program. This unwillingness to participate can be attributed to the fact that banks were not given assurances that they’d be protected if they approved higher LTV loans and then the borrowers defaulted. Those banks that did participate only allowed for a LTV limit of 105 percent. Many borrowers were and still remain at LTV ratios of more than 120 percent. So, you can see where the problems came into play.
HARP 2.0 is New and Improved
Lenders Should Be More Willing to Participate in HARP 2.0
HARP 2.0 is intended to take away many of the obstacles that limited the program’s initial success. For example, LTV limitations have been removed entirely and the “reps and warrrants” are being modified in order to protect lenders who adhere to the rules of the program as designed. This should really help to increase lender participation in the modified HARP 2.0 program.
Borrowers Will Be Granted Access to Lower Rates and Shortened Mortgage Terms
HARP 2.0 removes “loan level price adjustments” that normally restricted those with high LTVs from getting lower loan rates. This means that if you’re underwater with a high LTV, you can actually take advantage of today’s low interest rates! Florida mortgage borrowers and others around the country will also be encouraged to refinance their 30 year mortgage into a shorter term vehicle – say, a 15 year Florida home loan. This will help you speed up the period of time it takes for you to build up equity in your home! You’ll also end up paying much less interest over a shorter time frame.
What You Need to Qualify for HARP 2.0
First think you should take note of is that your mortgage must be owned by either Fannie Mae or Freddie Mac. This is the only pitfall I can see with the Harp 2.0 program – as millions of Florida mortgage borrowers and those elsewhere around the country have loans not owned by Freddie or Fannie. Second, with HARP 2.0 mortgage being owned by Fannie Mae or Freddie Mac, the mortgage underwriting should be must like the traditional mortgage approval process. You’ll still have the usual mortgage disclosures to sign and will have to turn in the same financial supporting documentation.
Here are the Top Five Steps to Getting HARP 2.0 Approved
Step One: Make sure that your Florida mortgage is owned by either Fannie Mae or Freddie Mac.
This stipulation has always been a part of the HARP program, and perhaps other loans will be brought into the picture at some point. For now, you can check to see whether your Florida mortgage is backed by Freddie or Fannie via the following links:
Step Two: Be sure your Florida mortgage is old enough
HARP 2.0 only impacts loans that were securitized prior to June 1, 2009. So, if you closed on your mortgage after this date, then you are unable to apply for HARP 2.0 assistance. A simple way to determine whether your mortgage date is within the proper range is to take a look at your closing paperwork. Look in the top right hand corner for where it says “funding date.” This is the date you want to check.
Step Three: Make sure your Florida mortgage does not have Lender Paid Mortgage Insurance.
The HARP 2.0 program is set up to assist mortgage borrowers with or without private mortgage insurance (PMI). However, there are stipulations in the HARP 2.0 documentation that specifically prohibit use of this program by borrowers who elected to use lender paid mortgage insurance (LPMI).
LPMI is defined as mortgage insurance that is factored into your mortgage rate. If you look at your mortgage paperwork and see that your mortgage insurance is itemized as a separate monthly payment, it’s likely that you are paying PMI and are in good shape. Also watch out if your paperwork says you pay single-premium insurance, as this will render your mortgage ineligible for HARP 2.0 as well.
Step Four: Be sure you’ve been current on your Florida mortgage payments
HARP 2.0 stipulates that must have made your last six mortgage payments in a timely manner, with no more than one (1) 30-day late payment over the past 12 months. This information is checked via your credit report, so make certain that you review your credit report from all 3 bureaus before turning in your HARP 2.0 application.
Step Five: Locate and pull together your Florida mortgage and other supporting documentation.
HARP 2.0 mortgages are underwritten just like any other mortgage. The underwriting process requires you to provide drivers license documentation, proof of homeowners insurance coverage, pay stubs, and your W-2 information. Self employed borrowers need to furnish several years of tax returns in order to verify income.
Getting this information pulled together now will help you get your HARP 2.0 application submitted faster. The automatic underwriting process most lenders today use goes into effect on or around March 15, 2012. As is the case with many things in life, you want to be at the front of the line if you want to be served first!
If you feel you qualify for the HARP 2.0 program, please contact me at the number above. I look forward to hearing from you!