(Source: Kimberly Miller The Palm Beach Post, Fla.) – Three months after the Oba-ma administration announced a revolutionary refinance plan for severely underwater homeowners, most borrowers are still unable to apply.
Technological barriers, as well as lingering questions about the new Home Affordable Refinance Program, have left many optimistic homeowners in a holding pattern as they watch interest rates bump around near record lows. Last week’s 3.98 percent for a 30-year fixed-rate loan marked the eighth consecutive week that the average was below 4 percent.
But a mid-March update to automated loan approval systems at federal mortgage backers Fannie Mae and Freddie Mac should start things flowing, mortgage brokers said.
The automated systems are set to reject refinances on loans where the borrower owes more than 25 percent on the loan over what the home is worth – the limit under the old federal Home Affordable Refinance Program .
HARP 2.0, as the new program is sometimes called, has no cap for most refinances.
Until Fannie and Freddie update the underwriting program, banks that give refinances to severely underwater borrowers don’t know if the two enterprises will buy the loans or if the banks will be stuck with them on their books.
“If the loan is ineligible with Fannie, then you are underwriting it at your own risk, and it’s that risk that no one is willing to take,” said Tina Mulligan, vice president of the Florida Association of Mortgage Professionals. “You won’t see many applications being taken until probably after March 1.”
Fannie Mae and Freddie Mac buy home loans from lenders with a guarantee against default and sell them to investors worldwide. They own or guarantee about half of all U.S. mortgages.
Only Fannie Mae and Freddie Mac loans are eligible for HARP 2.0.
President Obama announced another new refinance program during last week’s State of the Union address that would allow privately held underwater mortgages to refinance.
The proposal, which would require approval from Congress, could save homeowners about $3,000 a year on their mortgage, Obama said.
“No more red tape. No more runaround from the banks,” he pledged.
To qualify for HARP 2.0, borrowers must be current on payments, have no late payments in the past six months and no more than one late payment in the past 12 months.
While there have been delays, some lenders are making headway on HARP 2.0.
Bank of America rolled out a program on Jan. 17, but only to its mortgage customers, said spokesman Terry Francisco. CitiMortgage and GMAC Mortgage also are accepting applications from their customers.
JP Morgan Chase spokeswoman Melissa Shuffield said the bank will begin processing HARP 2.0 refinances from its customers on Feb. 6. Wells Fargo does not have a timeline for implementation.
“We’re optimistic we can begin taking those applications within the next few weeks,” Wells Fargo spokesman Jason Menke said. “We don’t have a lot of specifics to share right now, but obviously we’re working to implement the HARP changes as quickly as possible.”
For homeowners whose loans are serviced by non-lending institutions, it could be mid-March before they can apply.
One benefit of the new HARP is that homeowners who refinance into shorter-term loans should see interest rates that are comparable to those charged to borrowers who have equity in their home. Traditionally, the more underwater a homeowner is, the higher the risk and thus the higher the interest rate.
Also, fees will be reduced or eliminated for high-risk borrowers who refinance into loans shorter than 30 years.
“My office probably fields four to six calls a day on this program from people who are inquiring about it and asking when it’s going to be available,” said Jon Turla, president of the Tallahassee-based Florida Association of Mortgage Professionals. “We tell them it was announced, but as of right now we don’t have the ability to take applications or close the mortgage.”
Skip McDonough, a broker with Family Mortgage in Jupiter, expects a rush to refinance in March. He suggests homeowners start preparing now by checking whether the loan is guaranteed by Fannie Mae or Freddie Mac and gathering such paperwork as bank statements and proof of income.
“Yes, the full program doesn’t hit until right after St. Patty’s Day, but interested homeowners should not wait to begin the process,” he said. “Thousands of homeowners will be applying to take advantage at the same time.”
©2012 The Palm Beach Post (West Palm Beach, Fla.)
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Source: Kimberly Miller The Palm Beach Post, Fla.