Marc Guzman's West County Blog

Lenders will not look at your ability to pay a loan back and not make it a qualification requirement to refinance.  In your opinion is this crazy or not?  Well however way you look at it, it appears Fannie Mae is making this change to their Home Affordable Refinance Program 2.0 (HARP).

The new HARP 2.0 is supposed to allow a large number of underwater homeowner the ability to refinance despite the loan-to-value ratio.  The program was announced in October with a start date of December 1, 2011 but due to much confusion and continued debates, HARP 2.0 is delayed until next year.

Well it appears that one huge factor has been deciding if the homeowner’s “Ability-to-Pay” is truly required for the qualification process.  Fannie Mae now got rid of the requirement saying the clause “is preventing a large chunk of underwater mortgages from entering the program.”

So how will lenders know if the homeowner can afford the mortgage and will not default?  Several ways.  First, the mortgage payment cannot increase more than 20%.  Second, the lender can look at the payment history, credit and number of payments made.  Third, verbally verified income source.  Ok this last one is a shock because who will “verbally verify” this income source?  If they are not checking the borrower’s ability-to-pay (which a part of that is verifying income through the borrower’s employer), is the homeowner going to verbally state their income?

(Woah…. FLASHBACK TO 2005)