HARP 3.0 Legislation in the Works.
One proposed bill is the Responsible Homeowner Refinancing Act of 2012, sponsored by Senators Barbara Boxer and Bob Menendez. The act gives HUD the authority to extend streamlined refinancing to all loans insured by government-sponsored enterprises. This means that borrowers with GSE loans would no longer be hindered by appraisal or loan-to-value requirements.
Another proposal would enable refinancing for borrowers with non-government-backed mortgages. These borrowers would be eligible if they are employed with good credit and are up to date on their mortgage; certain limits to the mortgage amount would also apply. While the FHA would run the program, the financing would come from outside the administration.
A third piece of legislation would require GSEs to cover the average closing costs for refinanced loans with new terms under 20 years, saving borrowers $3,000 on average.
Clearing obstacles to refinancing with the HARP 3.0 program.
So, what hurdles do homeowners trying to refinance their loans still face? Some borrowers with 80% or lower loan-to-value ratios on their first liens can’t refinance because of second liens or additional debt. They must have the second mortgage written down or even extinguished before proceeding. Appraisal costs can also be a problem, as not all areas are covered by automated appraisals and instead require more expensive manual ones, discouraging refinances. Costs can also be affected by competition (or the lack of it) among servicers, and some servicers don’t have enough incentive to finance loans unless they are already servicing them.
One way to change this would be the facilitation of cross-servicer refinances. The goal would be to bring these to the same level as traditional same-servicer refinances by setting the same eligibility standards and representations and warranties for both groups. This would include loosening the underwriting requirements for cross-serviced loans to allow for greater competition and thus more favorable refinance options for borrowers.
Donovan said that there are measures planned to protect against risk in extending refinancing to non-GSE borrowers. Since these borrowers need to be current on their loans and meet credit and employment conditions for eligibility, the loans would already be considered low-risk. For high-risk underwater loans, refinancing would only be possible if they were written down to a loan-to-value ratio of 140% or less.
MI Cancellation
With a HARP refinance, the percent of coverage and premium rate of the mortgage insurance are unchanged, as only the existing coverage is being modified. The premium rate can be enacted on a new loan amount, and any change in the amount has an effect on the premium.
MI is automatically canceled either at the halfway point of the life of the new loan or at 78% of the new loan value, depending on which comes first. However, the lender may opt to cancel any MI policy paid by the borrower at any time.
What is HARP 3.0?
Home Affordable Refinance Program for non Fannie Mae or Freddie Mac borrowers.
The Obama administration may be unveiling a new variation of the HARP program as early as next week.
On Tuesday, President Obama called on Congress to pass legislation that will give all borrowers who are current on their mortgages the opportunity to refinance.
The new proposed HARP 3.0 builds on the momentum of the HARP and HARP 2.0 programs which were revamped last year to help millions of additional underwater home owners in the United States. Guidelines such as loan to value, income requirements, and in home appraisals are being streamlined so that home owners may refinance at today’s low interest rates.
The new program should have all the same benefits without requiring that the existing loan be owned by Fannie Mae or Freddie Mac.
