The government-sponsored enterprises (GSEs) have announced their guidelines for Phase II of the Obama Adminsitration's Home Affordable Refinance Program (HARP), or HARP Phase II. The enhancements made to HARP resulting in HARP Phase II were developed at the direction of the Federal Housing Finance Agency (FHFA), with input from lenders, mortgage insurers and other industry participants.
Enhancements to HARP Phase II include:
►The elimination of certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
►The removal of the current 125 percent loan-to-value (LTV) ratio ceiling for fixed-rate mortgages (FRMs) backed by the GSEs;
►The waiving of certain representations and warranties that lenders commit to in making loans owned or guaranteed by the GSEs;
►The elimination of the need for a new property appraisal where there is a reliable automated valuation model (AVM) estimate provided by the GSEs; and
►The extension of the end date for HARP until Dec. 31, 2013 for loans originally sold to the GSEs on or before May 31, 2009.
"HARP Phase II will help those homeowners who are paying their mortgages on time the ability to finally refinance their home loan at today’s lower rates on loans that are already owned by Fannie Mae and Freddie Mac," said National Association of Mortgage Brokers (NAMB) Communications Committee Chair Fred Arnold, CMC of American Family Funding in Stevenson Ranch, Calif. "It will also reduce the risk of foreclosure of these loans as the homeowner will be in much sounder financial position with their lower payment of shorter term on their mortgage."
The new guidelines take lenders and servicers off the hook by removing their legal responsibilities for problems with original loans once homeowners refinance with Fannie and Freddie.
"We ran counts with the bureaus for HARP Phase II criteria suppressed against the standard criteria pre-HARP II and discovered that more than 27 million untouched homeowners would be eligible," said Raymond Bartreau, founder and chief executive officer of Best Rate Referrals. "We are about to experience the next 'boom' and we're staffed up to handle the influx of HARP Phase II opportunities."
Fannie Mae's HARP Phase II guidelines include the removal of the maximum LTV ratio limit for Refi Plus mortgage loans secured by fixed-rate mortgages with terms up to 30 years. This includes loans with terms of 15 years, which were previously restricted to a maximum LTV ratio of 105 percent. Freddie Mac's HARP Phase II guidelines relieve lenders of liability to borrowers who refinance their loans with LTVs above 80 percent.
“These changes are certainly a step in the right direction, and provided that rates remain low, should allow many homeowners to refinance and save a considerable amount of money. This will help the overall economy and put us closer to recovery,” said John Walsh, president of Total Mortgage Services LLC.