Marc Guzman's West County Blog

After all the big hype by the government in releasing a new version of the Homeowner Assistance Refinance Program (HARP), HARP 2.0 was released today.  The biggest obstacle that the original refinance program ran into was a cap of 125% Loan-to-Value ratio.  This meant if your property was more than 25% underwater, then you would not be able to refinance.  Well that made it very difficult for many homeowners because with the large decline in home values, most underwater homeowners were well above that 125% cap.

So the idea of HARP 2.0 came into play.  There were several changes but the most significant change was the removal of the 125% Loan-to-Value cap.  This would have allowed many more homeowners to refinance and obtain a lower interest rate on their mortgage.  Today, on February 6th and after much delay, HARP 2.0 was released but with a huge disappointment… the cap of 125% Loan-to-Value still remains.  There are several minor changes in the new refinance program but the most significant change needed was not made.

So for the homeowners underwater that were limited by the 125% cap and who were hoping to refinance to save a few hundred dollars a month, today was an unfortunate day.  But maybe there is some hope with a new refinance program that Obama hinted at for later this year.  I guess we will have to wait and see…

Marc Guzman

Ok maybe it’s not HARP 3.0 if HARP 2.0 hasn’t been released.  As a quick refresher, the Homeowner Assistance Refinance Program (HARP) was created to help underwater homeowners refinance their mortgages to current interest rates.  But HARP has fallen short of its original goal of helping millions of homeowners mainly due to its limitation of a maximum Loan-to-Value (LTV) ratio of 125%.  It is estimated that in the hardest hit markets, approximately 40-50% of homeowners are underwater by more than 25%.  Thus HARP 2.0 was created which would eliminate the 125% Loan-to-Value ratio among many other changes.  This would allow many homeowners to refinance to current interest rate levels allowing some to save as much as $300-$500 per month on their payment.

What’s the catch?

HARP 2.0 was to be released in December 2011 and be available to homeowners whose mortgage was owned by Freddie Mac or Fannie Mae.  The homeowner also has to be on time with their payments with no more than one late payment in the previous 12 months.  But the Federal Housing Finance Agency (FHFA), who is in charge of overseeing Fannie Mae and Freddie Mac, delayed HARP 2.0 until March 2012.  Their reasoning was due to trying to update the banks on the new procedures.

President Obama and the State of the Union

It appears that President Obama wanted to make this a part of his State of the Union address.  He did not go into too much detail over the new refinance program to take place in the coming months but he throw in an interesting twist.  The new HARP 2.0 would allow homeowners with mortgages NOT guaranteed by Fannie Mae or Freddie Mac to be refinanced.  Read that again… Now we know it wouldn’t go over well if taxpayers had to pay the bill to further refinance mortgages but Obama said the program would be funded by “a small fee on the largest financial institutions.”

I wonder if this “small fee” would come from the settlement between the Attorney Generals and the largest financial institutions?

The housing market this year has been very interesting and with lots of changes on every level.  As new things happen, I try to post it as quickly as possible for all to read. 2012 will bring many changes to my blog but for now, let’s take a look at the Best of the Best of 2011.  Thank you again to all who take the time to read and support West County Blog.

#1 - $116,876 from Bank of America for Each Servicemember Foreclosed Upon. 

#2 - Just Released! HARP Allows Underwater Homeowners to Refinance

#3 - What If You Could Walk Away From Your Mortgage But Not Your House?

#4 - PMI Is Now Officially Bust

#5 - Power of Leverage: 19% Return on Investment!

These articles accounted for 24% of the total views.  Remember, I am always looking for feedback to continually improve the content I bring to you so please use the “Ask Me Anything!” feature.

Hope everyone had a great Christmas holiday and wish everyone a Happy Upcoming New Years! 

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)

On Monday, October 24th, the Federal Housing Finance Agency announced rule changes to the Home Affordable Refinance Program (HARP).  The new rules are designed to double, maybe even triple, the number of underwater homeowners it can help by eliminating the loan-to-value ratio cap of 125%.  This would allow many homeowners to refinance at today’s crazy low interest rates without worrying that they owe too much compared to the property’s current value.

The new HARP 2.0 was supposed to go into effect on December 1st, 2011.. at least that was what the FHFA announced.  Their reason for delaying it until December 1st was to have enough time to give the participating banks instructions.  Well the December 1st deadline came and went, and HARP 2.0 is still not active.  The old HARP rules still apply, so homeowners that try to refinance through HARP will still run into many difficulties.

So when will HARP 2.0 be released?  It was announced that the new HARP rules will be delayed until March of 2012.