On October 24, 2011, the Obama Administration announced long-hinted to changes regarding the Home Affordable Refinance Program (HARP) in an attempt to help more troubled homeowners by enabling them to refinance high loan-to-value mortgage loans at current low interest rates. The enhanced HARP will be available through December 31, 2013. Guidance and operational details will be issued to lenders by November 15, 2011, and the Federal Housing Finance Agency (FHFA) expects that some lenders will be able to accommodate mortgage applications based on the enhancements to HARP by December 1, 2011. FHFA also expects that some enhancements, such as the delivery of loans with loan-to-value (LTV) ratios above 125 percent, will be operational during the first quarter of 2012.
To qualify for the enhanced HARP, the existing mortgage loan of a borrower must be owned or guaranteed by Fannie Mae or Freddie Mac and the following conditions must be satisfied:
- The loan was sold to Fannie Mae or Freddie Mac on or before May 31, 2009;
- The loan was not refinanced under HARP previously, unless it is a Fannie Mae loan that was refinanced under HARP from March to May 2009;
- The current LTV ratio of the existing mortgage loan exceeds 80 percent; and
- The borrower is current on the loan at the time of the refinance under HARP, and did not have a late payment in the past six months or more than one late payment in the past 12 months.
Enhancements to HARP include:
- Removal of the 125 percent LTV ratio cap for fixed rate mortgage loans. Adjustable rate mortgage loans are subject to a 105 percent LTV ratio cap;
- Elimination of the requirement for an appraisal if there is a reliable automated valuation model estimate of the property’s value provided by FHFA, Fannie Mae or Freddie Mac;
- The waiving of certain representations and warranties that lenders generally make in selling loans that are purchased or guaranteed by Fannie Mae or Freddie Mac; and
- Eliminating certain risk-based fees for borrowers who refinance into a mortgage loan with a shorter term than their existing mortgage, and lowering fees for other borrowers.
In an industry call, FHFA advised that an existing mortgage loan secured by non-owner occupied property will be eligible for the enhanced HARP if the property was owner-occupied at the time of origination. Additional details will be provided in the guidance and operational details to be issued by November 15, 2011.