Tuesday, October 23, 2012

Have you HARPed Yet?

Have you HARPed Yet?
  • Posted by Preston Howard
  • October 2, 2012 5:18:10 PM MDT
One of the few bright spots in the mortgage malaise of our current recession has been the advent of the Fannie Mae Desktop Underwriting (DU) Refi Plus program and Freddie Mac My Refinance Program, also known as “HARP.” It has had a few renditions, but the current version is great. The amazing thing is that a lot of people aren’t taking advantage of it. When one considers the benefits, it’s hard to imagine an eligible borrower wouldn’t take advantage, but that is exactly what is going on.
The basics of HARP is that it allows underwater borrowers to refinance their homes if they meet the following criteria, namely:
  1. The underlying loan is owned by Fannie Mae or Freddie Mac;
  2. The borrower is current on their loan payments;
  3. The borrower has a FICO of 620 or higher; and
  4. The existing loan closed prior to June 1, 2009
Many borrowers believe that because they filled out a loan application with Wells Fargo, Bank of America, Citi or US Bank that it is a foregone conclusion that one of these banks own their loan. However, nothing could be further from the truth. By and large, if a borrower has a loan that is less than $625,000, for which they submitted paystubs, tax returns, bank statements, and W-2s, there is a high probability (90%+) that either Fannie Mae or Freddie Mac owns their loan. At this point, a borrower needs to pick up the phone and dial the 1-800 number shown on their mortgage statement and wait to speak to a live individual in customer service. Upon reaching a live person, the borrower should ask the point blank question “who owns my loan?” With that query, the borrower should get a response of Fannie Mae, Freddie Mac, the FHA, or the least favorable option of “a private investor.”
If the customer service representative says that Fannie Mae or Freddie Mac owns the loan and the loan was closed before June 1, 2009, there is a ray of hope that something can be done. With a 620 FICO and gainful employment, a borrower with a 6.875% interest rate may be able to cut their rate in half. The advantages are numerous. The Loan-to-Value (LTV) can go up to 150%. Combined LTV percentages can be unlimited. Loans with Private Mortgage Insurance (PMI) are allowed. Appraisals can be waived. Not only can primary residences be refinanced, but vacation homes, and non-owner occupied properties can be refinanced as well. So, if one can, they should take advantage of this program while it exists. Surprisingly, within a 10-mile radius of one’s home, you may find 2,000 houses that have not taken advantage; recently, I’ve checked in my neighborhood.
Therefore, with any good program, if you are HARP eligible, you should take advantage of it. While the Federal government has instituted it now, it can be revoked. As it is said on so many late night infomercials “call now, while this limited time offer is still available!”