There's a big change coming in the HARP 2.0 program that will
make it easier and faster for homeowners to refinance their
underwater mortgages, and possibly save them several hundred
dollars as well.
Within the next few days, Fannie Mae and Freddie Mac are
scheduled to release their automated underwriting software for use
with the updated program, which will help lenders process
Not only that, but once the Desktop Underwriter software is
available, lenders will also have the option of using an automatic
method of calculating home values as well, rather than requiring an
appraisal of the property. That could mean a savings of $300-$500
in appraisal fees for borrowers.
The revised HARP 2.0 refinance program for underwater mortgages
has been around for several months, but lenders have so far had to
underwrite the loans manually to refinance under the program's new
Loan-to-value restrictions lifted
Those new guidelines include eliminating the limit on how far
underwater a borrower can be and still qualify for a HARP
refinance. Previously, borrowers could owe no more than 125 percent
of the value of their home; the new guidelines have no limit on how
much you mortgage debt may exceed your home value.
Lenders are loosening up their own limits as well. Under the old
rules, many lenders limited HARP refinances to loan-to-value ratios
of 105 percent or less, below the program limit of 125 percent.
With HARP 2.0 however, many large lenders are embracing mortgage
refinances in with loan-to-value limits above 125 percent, with
Citigroup and Ally Financial being two of the most active.
Bank of America easing rules
Bank of America is following a policy of no loan-to-value limits
on HARP 2.0 refinances, according to spokesman Terry Francisco.
"We're open-ended. We're matching everything with the program,"
he said, in reference to removing the cap on loan-to-value limits.
"A lot of people who haven't been able to do this in the past are
benefitting from it now.
Francisco said the lender will also be making use of the
automated valuation model for many borrowers, meaning they will not
have to pay for an appraisal.
"That's a big savings that people who are considering it might
not be aware of," he said.
Rates slightly higher than standard refinance
The refinance mortgage rates that are available under the HARP
2.0 program are slightly higher than the same borrower would obtain
if they had significant equity in their home, but the increase is
limited under program rules.
Another way borrowers can save under the new HARP program is
that lender fees are reduced for borrowers refinancing into 15- or
20-year fixed-rate mortgages in order to pay down their loan
balances more quickly.
As with the original program, HARP refinances are limited to
borrowers with mortgages backed by Fannie Mae or Freddie Mac, and
which were taken out prior to May 31, 2009. Borrowers must be
current on their mortgage payments as well.