New Underwater Refinance Program Is Not for Everyone

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Did any of your short sale sellers call you last week to tell you that they were cancelling their short sale listing? Did they tell you that they were going to take advantage of Obama’s new program instead?

Well, that’s just the latest in a series of pieces of information that distressed borrowers hear about in the news, yet do not study in more detail. Below I have outlined the ins and outs of the new, revamped HARP program. After you read the information, you will see that most short sale sellers will not qualify for this program—despite the fact that they tell you that they will.

About HARP

The Home Affordable Refinance Program (HARP) is a government mortgage program, first introduced in 2009 as a means to help underwater homeowners.

HARP allows “underwater” homeowners to refinance their respective homes.

HARP is for mortgages secured by Fannie Mae and Freddie Mac only.

The Government Improves Upon The HARP Program

When HARP was first launched in 2009, the government said that the program would help millions of otherwise-ineligible U.S. households to obtain a refinance of their mortgage. At the time, rates were falling and homeowners were eager to lock in savings. Unfortunately, the government’s estimates fell short. In the last two years, only 838,000 homeowners have used the HARP program. As a result, HARP has been accused of missing the mark.

On October 24, 2011, there was a major announcement made about changes to the HARP program. The biggest change is that some homeowners who are significantly underwater (over 125% loan to value) can now qualify for the program.

Here are some answers to commonly asked questions about the new revamped HARP program (HARP 2.0):

What Is HARP?

HARP was started in April 2009. The government calls it Home Affordable Refinance Program.

In order to be eligible for the HARP refinance program:

  1. Fannie Mae or Freddie Mac must back your loan.
  2. Your current mortgage must have a securitization date prior to June 1, 2009.

If you meet these two criteria, you may be HARP-eligible. If your mortgage is FHA, USDA or a jumbo mortgage, you are not HARP-eligible.

How do I know if Fannie Mae or Freddie Mac holds the mortgage? You can use lookup tools on the Fannie Mae and Freddie Mac websites.

If Fannie Mae or Freddie Mac holds the mortgage, is the borrower automatically eligible for the Home Affordable Refinance Program? No. There are a number of criteria. Having your mortgage held by Fannie or Freddie is just the beginning.

What if neither Fannie Mae nor Freddie Mac has a record of the mortgage? If neither Fannie nor Freddie has record of the mortgage, the borrower is not eligible for this refinance program.

Is a borrower eligible for the Home Affordable Refinance Program if s/he is behind on the mortgage payments? No. You must be current on your mortgage to refinance through this program.

Will the Home Affordable Refinance Program help borrowers to avoid foreclosure? No. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It’s meant to give homeowners who are current on their mortgages, and who have lost home equity, a chance to refinance at today’s low mortgage rates.

What are the minimum requirements to be eligible for HARP? First, the home loan must have been paid on time for the last 6 months, and at least 11 of the most recent 12 months. Second, your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009. Lastly, you may not have used the HARP program before: only one HARP refinance per mortgage is allowed.

Is there a loan-to-value restriction for HARP? No, there is no loan-to-value restriction. All homes (regardless of equity) are eligible for the HARP program—just as long as the borrower and the loan meet all of the other criteria.

What’s the biggest mortgage you can obtain with a HARP refinance? HARP refinances are limited to your area’s conforming loan limits. In most cities, the conforming loan limit is $417,000. However, in San Diego County, the current confirming loan limit for a single-family home is $546,250.

If a borrower in unemployed, will s/he eligible for HARP? No. Income verification is required for the HARP refinance program.

Is there a minimum credit score to use the HARP program? No. There is no minimum credit score requirement with the HARP refinance program. However, you must qualify for the mortgage based on traditional underwriting standards.

While this program will open up opportunities for responsible borrowers who are significantly underwater, it is definitely not a salvation for most of those sellers participating in short sales. So, before short sale sellers get super excited about the refinance, make sure that they understand the scope of the program.

Photo: flickr creative commons by eschipul


    • Melissa Zavala

      You need to find out whether the current loan is Fannie Mae or Freddie Mac, and then make sure it meets the qualifiers described in the article. If it does, contact any mortgage loan officer to try to get qualified.

      • So if you are over 125% on your loan amount to value and you have been current on your mortage for 6 months and your loan is Fannie or Freddie and your loan is under $417,000 is there any other reason your refi would be turned down???

    • Alex

      I’m not a lender nor real estate professional, but based on what I have read and my current lender has told me most banks will participate. Bank of America, Wells and Citi are participating (I called them). Also, you don’t need to use your servicer to refinance (mine is the worst out there – green Tree: they charge $12 per month for paying online plus they call you as if u were late when they actually have the check in their hands. They do things manually.)

      Wells and Quick loans told me that I did not have to use my current lender.

      • Melissa Zavala

        You are correct. You can use any lender to do the refi–as long as they work with Fannie Mae and Freddie Mac. However, it looks like not much will be processed until late winter.

  1. Christopher G

    Another of couple wrinkles in this thing: Refinance into what?

    OK, so we’ve got the payment history, LTV, GSE-held loan thing down?

    What are the rates? After 3 different LOs and about 30 minutes what I came up with is 5.5%. Keep in mind this is a REFINANCE, not a Mod. So there will be refi transaction “friction” (costs) involved. Now, my client already has a fixed 5.875 with existing loan, so not too much benefit to 3/8 a point better. AND it will be a new 30 year, whereas they only have 15 left on their 20 year fixed. So unless someone has 6.5% or higher, not too much juice here. Surprisingly what you may find is that many adj rate folks have much LOWER rates than these fixed HARP deals. And if they’re struggling with that…. (:p

    There is NO principal reduction here, just refi an upside down position.

    Oh, and it is still VOLUNTARY for all the servicer/lenders.

    Not sure there’s much fire to this smoke….

    • Melissa Zavala

      Totally agree with your fire analogy. Thanks for chiming in. The intent of the post was for real estate agent folks to understand more about the details–especially since clients may be getting very excited over what may be nothing.

    • Central Florida

      Chris, you’re exactly correct…just got off phone with Bank of America, for me only, 1/2 % rate reduction…back to 30 year fixed from what I’ve already payed down in principle. Plus significant closing cost added back into mortgage. Not a flame out deal. I think it is just another political move by our leaders. Talk is cheap. How bout some real help for a change.

    • Melissa Zavala

      If your first lien is with Fannie Mae or Freddie Mac, you can call a mortgage loan officer after 11/15 (when the program begins) and see whether you will quality.

  2. Yvonne Salazar

    I am told through WF that I qualify for the new Harp Program on our first mortgage and qualify under the previous guidelines and the new ones are just an expansion of those. The new guidelines are a moot point as they pertain to our specific loan.
    I currently have a fixed load with 6.25 interest rate and would qualify for the following:


    Do you think I should wait for the guidelines and shop around? Also, I do have a 2nd mortgage (Home Equity-Line of Credit).

    I was just reading a Summary of Changes to Freddie Mac Relief Mortgage Offering-Eligibility Requirements. I am confused about the Relief Refinance Mortgage Same Service vs Relief Refinance Mortgage-Open Access chart.

    Can you please explain the two and/or provide some insight?


    • Melissa Zavala

      I really do not know a ton about the program, but those rates you quote sound pretty good. Not sure anything will change with the new guidelines. I believe it is just that now the Fannie Mae/Freddie Mac program and that now it is for responsible homeowners that are more deeply underwater.

  3. Ben

    The 1st mortgage on my primary residence (close date 5/09) is held by Fannie Mae. I sold a rental property via shot sale, finalized in Dec 2010. Would I qualify (now) for Harp 2.0 refi for my primary residence, which has never had a late payment? If so, can I expect a rate much better than my current 5.125% 30yr fixed rate?
    thanks, Ben

    • Melissa Zavala

      Sounds like it might be a good program for you. Call a reputable loan officer and compare interest rates. Don’t forget–it’s only for Fannie Mae and Freddie Mac loans!

  4. Ruben Reyes

    We owe 102,000 on our mortgage, the houses in our neighborhood are selling for less than what i paid for my car. $19,900. Would the HARP program benefit us and how? It seems that it makes more sense to rent my parents house and let our home go inot foreclosure. I would consider staying in our home if the bank would adjust what we owe.

    • Melissa Zavala

      It does sound like it would take quite awhile for the value on that property to return to 102k. But, they say that HARP is for all applicable loans (yours might not be one)–it does not matter how underwater you are.

  5. Lawng Dawng

    Here’s another wrench to throw into all this monkey business. I attempted to call my servicer, BofA to determine whether or not they had already begun accepting applications for the new Harp 2.0 program. As part of the requirement the loan must be either a Freddie Mac or Fannie Mae loan. Fannie’s source indicated that my current loan is a Fannie loan so this is when I decided to call BofA to confirm if I was indeed eligible. BofA checked the loan and said that I was ineligible because my original loan (pre-refi) was a private loan that didn’t come from either Fannie or Freddie. But was now a Fannie loan since I refi’d. Even though it currently is a Fannie loan I was still rejected. No where in the guidelines did any one say that it had to originate from either Fannie or Freddie in order to qualify. I agree that this is another political ploy to show that something is being done, when in fact all of us that got a mortgage pre-2009 are getting bent over and nailed.

    • That is an incorrect answer LD.
      It doesn’t matter what your original loan was, only who owns your current loan – hopefully Fannie, as you stated. Give me a call and we can figure this out. I’m licensed in IN,IL< MI, and KY.
      But I can help you find someone if you need help – Jay :

    • Lawn Dog,

      The problem may not be that you had a private loan before you received your current Fannie Mae secured loan. You probably didn’t get your current loan before the June 1st, 2009 deadline. or, your loan was pooled and secured as some other special loan program (community) that makes it ineligible. I’ve seen mortgages that Fannie Mae is saying are ineligible that were taken out pre-June 1, 2009.

      But stay tuned for HARP 3.0 for those who don’t qualify under HARP 2.0. FHA is actively working on a program to reward responsible homeowners who don’t qualify for the HARP 2.0 version.

  6. My husband has been doing the HARP 2 program. He said that the 30 year rate is about 4% no cost/no fees to the borrower. He is not sure that the rates are going to get any better with the new changes but is expecting the underwriting guidleines to loosen up a little making it easier for borrowers to qualify.

  7. Oleg

    Hello Melissa,

    Do I qualify for HARP if I have investment property? I am with Indymac – they have become the worst mortgage servicer after investors took over it in 2008-2009.
    I currently have 6.25% and called them numerous times and they always say they can not help. Can I go through different bank?

    Thank you.

    • Melissa Zavala

      I don’t think you will qualify for HARP if the property is not owner-occupied, but there are some other underwater refi programs that may be good for you. I’d contact a local mortgage officer.

  8. Chris K

    I was just told by Quicken Loans that there is nothing that can be done for me. I dont get it.
    Never missed a payment
    Bought the home in 2007 ( CA)
    Backed by Fannie Mae
    LTV is 168%.
    Did the two hour phone call with HUD. After that did a 3 way call with Setrus who pretty much told me to call Quicken Loans
    Any one know of a great bank/lender that can help me with HARP 2.0. Thanks

  9. Just a little update on the HARP 2 refinance from the field for those interested.

    Right now, the HARP 2 refinance is just getting up off it’s feet. Unfortunately, I have received maybe 30-40 calls from homeowners who have been told they don’t qualify, when in fact they do.

    May lenders are adding additional guidelines (overlays) to the core set of guidelines released by Fannie Mae and Freddie Mac. For example, many lenders are capping the LTV they will do a HARP loan to 125%, 150%, or 175%. Why? Because they can.

    I have been receiving appraisal waivers for most of my HARP refinance borrowers. I just received a HARP approval on a 239% LTV borrower. Whether he should refi or short sale is a whole other debate that I’d like to contribute to someday.

    – Yes, it is possible to do a HARP refinance on non-owner rental homes.
    – Yes, you can do a HARP refinance if you have either PMI or LPMI. The problem is most lenders wont allow it…..but we do.
    – and the list goes on and on.

    HARP interest rates are not as low as the regular conventional 20% down 800 FICO loan borrower.

    The only way to get the same rate rate on a HARP 2 refinance as a low LTV risk borrower is to pay discount points and buy the rate down. In general, the HARP refi rate, as of today, is about .25% higher than the rate reserved for those with equity.

    The HARP 2 refinance program is working for many, but it still doesn’t address the fact that people are still way upside down and won’t get back to 100% LTV for maybe another 8-12 years.

    Is it worth lowering your payment $200 – $400/month if there is still a good chance you will need or want to short sale in the next 5-10 years? Or that your mortgage payment is still way higher than if you short sold, rented, and bought again in 3 years?

  10. Jessica

    @ Brad: You hit the nail right on the head–what is theoretically “allowed” under Freddie Mac Harp 2.0 guidelines versus what banks *are actually willing to do* are two entirely different things, and that has been one of the most frustrating aspects of the process for those of us trying to refinance. We are told that it is prudent to go with a refi with a well-known bank, but the well-known banks are ones with the all the additional restriction overlays. I have a FICO score of over 800 and have never missed/been late on a payment, but I’ve ended up going after a refi with my current lender by default. I shudder to think what homeowners with more spotty credit or payment issues are having to go through if I’m having this much trouble.

  11. Jeff

    The following rule is preventing me from taking advantage from HARP 2.0

    – Your current mortgage must have a securitization date prior to June 1, 2009.

    Why is the a restriction, who cares of someone has re-financed since this date. My wife and I have never been late nor missed a payment but yet we’re being punished.

    • Melissa Zavala

      Jeff: All of the programs were part of Obama’s American Recovery and Reinvestment Act that was enacted in March of 2009. Perhaps that has something to do with the 2009 date.

  12. Marty Bonin

    I have been offered a HARP refinance. Next year, I plan to retire and move to a different state to be near family. If it turns out to be necessary, would I still be eligible for a short sale at that time, or does HARP slam the door on that option?

  13. Robert seagate

    My loan was from coutrywide, who sold to BOA, then sold to to greentree. I have been current always But want to refinance usingng harp. in NY there is the mortgage interest tax on new money unless you go back to to the bank you originally borrowed the money from? Can i go back to BOA for the harp to save on the mortgage interest tax.

    • Melissa Zavala

      What a great question! While I am uncertain of the answer, I would suggest starting with B of A. One thing to also check is whether your loan is owned by Fannie Mae or Freddie Mac–for HARP 2.0, it needs to be owned by Fannie or Freddie. If that’s the case, then you could also call Fannie or Freddie directly (they have toll-free numbers) and check. When the loan went to Greentree, it sounds like Greentree probably became the servicer for Fannie or Freddie. It does not sound like they own the note. If the did, then you would not qualify for HARP 2.0 (’cause it’s for Fannie and Freddie only). Hope that helps!

  14. Ashley

    Melissa, so if your loan is not with fanny or Freddie but u are underwater what can you do to get refinanced? My home was bought in 2006 with a 6% interest rate and our bank says they can’t do anything to help get our rate lowered unless we pay down our mtg to what it is worth. Well we don’t have $40,000 lying around to get down to what it’s worth. And we aren’t in a financial hardship. Why must ppl who have always paid on time be punished?

    • Melissa Zavala

      Obama did have a plan for those without Fannie and Freddie loans, but it has not yet gotten off the ground. Right now, your only option would be a loan mod… or you may be one of the lucky ones that could qualify for a principal reduction.

  15. John

    I purchased my home in 2002 through Chase with a refi with Commerce in 2003. Ive been told that the lone wasn’t secured until 2011, making me ineligible for a HARP refi??? I even confirmed this dates on a independent site. What is my alternatives? Does this make sense? Who should I be contacting Chase/Fannie both?? Help

    • Melissa Zavala

      You can still do a short sale or investigate other refi programs for upside down homeowners. However, it sounds like you will not qualify for HARP or HAFA. Again, that would not preclude you from looking into a loan mod, a short sale, or a short refi.

  16. Kevmo

    In your Nov., 17, 2012 response to Ashley, who didn’t qualify for a HARP or HAMP, you alluded to the possibility of a “principal reduction”. Can you elaborate? What is a principal reduction, how does it work, what are the pros & cons and participated lenders?

    My situation: Been with Indy Mac (One West Bank) since 2008, with whom I have a 6.25%/30 Fannie on a rental (112% LTV), and 6%/30 Freddie on my primary (120% LTV). Today a Indy loan rep told me my rental qualifies for HARP, but my primary doesn’t as Indy doesn’t do Freddie’s yet, but that may change soon.

    On the surface, it would seems that a principal reduction would sound preferable to a rate reduction, but I don’t know enough to know better.

  17. Grace Z

    I have a question and hope you can help…
    HARP says any existing second mortgage must be resubordinated…” Does it apply to unused equity line of credit? or does it have to be existing loan (i.e. money already taken out of the equity line).

  18. Brent

    I had two short sales, one in January 2010 and the second in June 2010. Six months ago, I tried to do a Harp 2.0 refi on my rental duplex but was denied. I still have the original money purchase loan since August 2006 own Fannie Mae. How long do I have to wait to be qualify for Harp2.0 refi? What can I do or need to do to be qualify before this Harp 2.0 program will end at the end of this year? Thanks! Brent

  19. Susan O'Day

    My name was on the second mortgage, with Green Tree, on my husbands home that was a short sale last year. I want to refi my condo to lower the interest (6.5) and my payments. No co will until July 2014 that I have contacted. My credit score is in the low 600s. Is there a company that will help me now?

    • Melissa Zavala

      Susan: Your best bet would be to try a few different lenders and see if they concur. It sounds like the short sale (because your name was on the loan) did damage to your credit as well.

  20. Irene

    HI. I refinanced my fannie mae first mortage at a lower rate in 2010. I don’t have any other mortages and have no equity in my home. I am now relocating out of the area and would like to sell my condo. It is worth 30000 more than i owe. Can I do a short sale, even though i refinanced in 2010.


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