I’m in a severely underwater mortgage (175LTV), and when Obama announced HARP 2.0 in late 2011, it was a way to shave some money of my mortgage payment (and the administration hopes I put that money back into the economy in the form of consumer spending). This and future blog posts under the HARP title will chronicle my progress of going through the process and hopefully help others who want to do the same thing. Its a departure from the tech stuff I normally talk about, but there is a dearth of information out there about going through HARP 2.0.
The HARP program is long and complex, and every bank and loan servicer I’ve talked to (Wells, Chase, Quicken Loans) seems to follow their own set of rules even though there are the rules the government sets out (the only thing they all seem to agree on is anything limited by the Fannie Mae/Freddie Mac software they must use to underwrite the loan).
So the first step is to find out if your home loan is underwritten by Fannie Mae or Freddie Mac. Each one has tools on their website (Fannie, Freddie) to help you figure this out. If your loan is backed by either one and you haven’t missed any payments in the last 12 months, then you are eligible for HARP 2.0 (with a few other conditions). If its not backed by either one, then you might be eligible for HARP 3.0 or the upcoming settlement with the banks.
From this point, you can start the refinance process.
Start with your current mortgage servicer. Contact them about the HARP program, and go from there. Most institutions aren’t accepting HARP-based refinances from other banks as of the date this was posted. In my case, my mortgage servicer is not a lending institution but they referred me to a lending institution that picked me up and started the refi process straight away. If your loan is less than 125LTV you should be able to proceed now, if its at or above that amount (like mine), then you might be able to start getting your ducks in a row now, but nothing can officially start until March 15.
After March 15, it will be possible to “shop around” for HARP refinances, but it is still at the discretion of the lending institution as to whether they will accept loans serviced by other companies (HARP is itself voluntary, but refinancing to a lower monthly payment increases the likelihood people will stay in their home, so its in the bank’s interest to do it).
March 15, 2012
This date pops up a lot in the HARP program. Its the day Fannie and Freddie roll out the new version of their Desktop Underwriter (DU) software. This software update will allow institutions to evaluate loans from other institutions, and also for homes with greater than 125LTV to refinance. This is the day that refi applications like mine can be officially put into the system and the process started, and interest rates locked.
HARP 2.0 Flexibility
HARP 2.0 allows for a bit more flexibility than HARP 1.0 did. The two big features are the expansion of LTV ratios (to 300%) and the ability to shorten the term of the loan (you can go from 30 years to 20 or 15 years). An additional feature is not needing an appraisal of the house, they’re going to use a software algorithm to determine your home value based on comparable sales and foreclosures.
Things I needed to start the refi process (this is not a comprehensive list of what you might need, especially if you’re self employed, it may also vary from lender to lender).
- W2/1099 forms
- Recent bank statements (within the last 3 months)
- Recent mortgage statement (within the last 3 months)
- Pay stub (current)
- Home insurance statement (current)
At this point I have all my paperwork ready except for the pay stub (it has to be the most recent one, so I wait). If I get it ready now, the loan will close quicker.