Government Releases Additional HARP Guidance For Underwater Homeowners

Tues­day, Fan­nie Mae and Fred­die Mac unveiled lender instruc­tions for the government’s revamped HARP pro­gram, kick-starting a poten­tial refi­nance frenzy nationwide.

HARP stands for Home Afford­able Refi­nance Pro­gram. The updated pro­gram is meant to give “under­wa­ter home­own­ers” an oppor­tu­nity to refi­nance at today’s low mort­gage rates.

In the two-plus years since its launch, HARP’s first iter­a­tion helped fewer than 900,000 home­own­ers. HARP II, by con­trast, is expected to reach millions.

Lenders begin tak­ing HARP II loan appli­ca­tions Decem­ber 1, 2011.

To apply for HARP, appli­cants must first meet 4 basic criteria :

The exist­ing mort­gage must be guar­an­teed by Fan­nie Mae or by Fred­die Mac
The exist­ing mort­gage must have been secu­ri­tized by Fan­nie Mae or Fred­die Mac prior to June 1, 2009
The mort­gage pay­ment his­tory must be per­fect going back 6 months
The mort­gage pay­ment his­tory may not include more than one 30-day late pay­ment going back 12 months
If the above cri­te­ria are met, HARP appli­cants will like what they see.

For HARP appli­cants, loan-level pric­ing adjust­ments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.

This will result in dra­mat­i­cally lower mort­gages rates for HARP appli­cants — espe­cially those with credit scores below 740. Some appli­cants will find HARP mort­gage rates lower than for a “tra­di­tional” con­ven­tional mortgage.

In addi­tion, HARP appli­cants are exempted from the stan­dard wait­ing period fol­low­ing a bank­ruptcy or fore­clo­sure, which is 4 years and 7 years, respectively.

These two items are inclu­sion­ary and should help HARP reach a broader U.S. audience.

HARP con­tains exclu­sion­ary poli­cies, too.

The “unlim­ited LTV” fea­ture only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value.
Appli­cants must be “requal­i­fied” if the pro­posed mort­gage pay­ment exceeds the cur­rent pay­ment by 20%.
Appli­cants must ben­e­fit from either a lower pay­ment, or a “more sta­ble” prod­uct to qualify
And, of course, HARP can only be used once.

Fan­nie Mae and Fred­die Mac will adopt slight vari­a­tions of the same HARP guide­lines so make sure to check with your loan offi­cer for the com­plete list of HARP eli­gi­bil­ity requirements.

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