The Home Affordable Refinance Program, more commonly known as HARP, seems to have guidelines that are evolving. When the program first came out there were quite a few “eligible” Orange County homeowners who were not approved. But recently, there are have updates the Fannie Mae and Freddie Mac’s underwriting engines which are resulting in approvals for previously declined loans.

What is a Home Affordable Refinance Program?

HARP can be many things. But in this case it’s not a musical instrument or an imported beer. It is a program that allows for current homeowners whose loan is owned by Fannie Mae or Freddie Mac. Credit for the program is given to President Obama, who pressured Fannie Mae and Freddie Mac to offer a solution for borrowers who had been current on their loan but had not been able to refinance due to a drop in property values. There have been different versions of HARP. but the latest is known as HARP 2.0. Previous versions capped the loan to value at between 105% and 125%. But in many parts of the country property values had fallen too much for many borrowers to qualify. HARP 2.0 allows people  to refinance even if they are at 250% loan to value. There is no limit to how far “upside down” or “underwater” a homeowner is that would prevent them from qualifying for a refinance under the HARP program.  However, loans were being declined initially that would seem to have been approvable.

Different Risk Levels for HARP 2.0

The Automated Underwriting engines for Fannie Mae/Freddie Mac (Desktop Underwriter=DU=Fannie Mae,  and Loan Prospector=LP=Freddie Mac) take into account the risks associated with a loan. For example, a homeowner in whose loan is $330,000 but whose property value is $130,000 may need some strong compensating factors for approval. Money in the bank for reserves, job stability, low debt to income ratios, and high FICO scores all help. Also, if the property is a condo instead of a single family home, it may carry more risk. HARP is also available for investors. But if the property is a condo, rental, low FICO scores and high debt to income ratios, then approval may not be possible. The only way to know for sure is to have a lender run your application through DU or LP.

I can say that from personal experience, there seems to be more approvals being issued lately. Loans that were declined, especially condo’s run through LP are now getting approvals only a few months later. Because of this, even if an Orange County borrower was declined when HARP 2.0 first came out, they should give it another shot. And even if declined again they should stay on top of any new updates.

With interest rates at all times low’s, and many borrowers who have not been able to refinance due to property values, the payment savings and pent-up demand for refinancing has never been so high. Find a local Orange County loan officer who can walk you through the process and quickly determine whether your loan is eligible for a HARP 2.0 refinance.

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Tim Storm

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