Combining Hardest Hit Funds With Existing Refi Programs Can Help Millions of Underwater Homeowners

Combining Hardest Hit Funds With Existing Refi Programs Can Help Millions of Underwater Homeowners

July 5, 2016

There are five existing refinance loans available for underwater homeowners that allow for: New secondary refinancing; no maximum combined loan-to-value (CLTV) of the first and second mortgage; and mortgage payments to stay current.

This could enable Hardest Hit Funds to be used as a new second mortgage to refinance underwater higher second mortgages and resetting interest-only home equity lines of credit (HELOCs) unable to be refinanced.

One of these mortgages, the FHA Short Refinance, can even provide a refinance where none is available for conventional first mortgages that are not Fannie Mae or Freddie Mac, therefore not eligible for the Home Affordable Refinance Program (HARP).

The five refinances are:

1. Fannie Mae DU Refi Plus Home Affordable Refinance Program (HARP) for existing Fannie Mae conventional first mortgages

2. Freddie Mac Relief Refinance (HARP) for existing Freddie Mac conventional first mortgages

3. FHA Short Refinance for negative equity non-FHA first mortgages

4. FHA Streamline for existing FHA mortgages

5. VA Interest Rate Reduction Refinance Loan (IRRRL)

Written guidelines for five refinances

1. Fannie Mae DU Refi Plus (HARP): B5-5.2-01: DU Refi Plus and Refi Plus Eligibility (03/29/16)
►No maximum loan-to-value (LTV) ratio for fixed-rates and no maximum combined loan-to-value (CLTV) and home equity combined loan-to-value (HCLTV) ratio.

Eligible subordinate financing: New subordinate financing is only permitted if it replaces existing subordinate financing.Using Hardest Hit Fund Programs (HHF) for principal reduction or closing cost assistance: Housing Finance Agencies (HFAs) have established programs utilizing HHF programs, which provide funding for various purposes, including funds for principal curtailment, to help homeowners obtain more affordable mortgages or to help homeowners retain their homes.

Existing mortgage must be current for last 12 months.

Note that the Home Affordable Refinance Program (HARP) will expire Dec. 31, 2016.

2. Freddie Mac Relief Refinance Mortgages (HARP): Same Servicer and Open Access 2016
No maximum Loan to Value (LTV) ratio for fixed-rate mortgages and maximum LTV ratio for ARMs is 105 percent. There are no maximum Total Loan-to-Value (TLTV) or Home Equity Total Loan-to-Value (HTLTV) ratios.

Secondary financing: Existing junior liens may be refinanced simultaneously with the first mortgage provided the junior lien is being refinanced for one of the following: A reduction in the interest rate of the junior lien, to replace an ARM, a balloon or call option with a fixed-rate, fully amortizing junior lien; a reduction in the amortization term or the monthly payment of the junior lien; and evaluating the borrower’s credit reputation: If an Accept is received through Loan Prospector, the credit reputation is acceptable. Otherwise, the homeowner must show they have been making payments on time for the last 12 months.

The Home Affordable Refinance Program (HARP) will expire Dec. 31, 2016.

3. FHA Short Refinance
Allows refinance of a non-FHA-insured mortgage in which the borrower is in a negative equity position.

The new loan’s maximum LTV ratio is 97.75 percent of the current property value.

There is no maximum CLTV ratio for second liens held by government entities or instrumentalities of government.

The borrower must be current on the existing mortgage, or have successfully completed a qualifying three-month trial payment plan.

The FHA Short Refinance program expires Dec. 31, 2016.

4. FHA Streamline Refinance
Proceeds are used to extinguish an existing FHA-insured first mortgage lien.

There is no maximum CLTV with subordinate financing.

New subordinate financing is permitted only where the proceeds of the subordinate financing are used to:

Reduce the principal amount of the existing FHA-insured mortgage or finance the origination fees, other closing costs or discount points associated with the refinance.

No more than a one-time, 30-day late on the mortgage in last 12 months.

5. VA Interest Rate Reduction Refinance Loan (IRRRL)
The VA is not concerned about the second mortgage being refinanced, other than it must be assumable (VA Loan Center: FL/ 4/4/16: per Nancy, 727-319-7500).

The IRRRL must replace the existing VA loan as the first lien on the same property. Any second lien-holder would have to agree to a subordinate to the first lien holder.

The prior loan is current (not 30 days or more past due) at the time of loan closing.

Pam Marron (NMLS#: 246438) is senior loan originator with Innovative Mortgage Services Inc. (NMLS#: 250769) in Tampa Bay, Fla. She may be reached by phone at (727) 375-8986, e-mail or visit, or

This article originally appeared in the April 2016 print edition of National Mortgage Professional Magazine.

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