HARP Most Commonly Asked Questions - Answered!

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
HARP M­­ost Commonly Asked Questions – Answered!
As you may know, I am one of the few HARP experts in the industry today and one of the main reasons I’m on this forum is to help educate homeowners of the options they have. I am a licensed California loan officer offering the program with unlimited LTV, loans with Mortgage Insurance and most of the time providing property inspection waivers (appraisal waivers).

What I’ve experienced recently as far as statistics:

Freddie Mac HARP through Loan Prospector (Open Access)

15 – 20% of clients get denied through Loan Prospector for various reasons. My statistics may be lower than normal as I know a few tricks to get past the Caution feedback.
95% of Freddie Mac clients receive appraisal waivers

Fannie Mae HARP through Desktop Underwriting
10 – 15% of clients get denied through Desktop Underwriter
75% of Fannie Mae clients receive appraisal waivers as long as the value submitted is realistic compared to the comparable sales in the area.

Questions & Answers

  1. Do I have to go through my current lender/servicer?
    1. Absolutely not! This is one of the biggest misconceptions with the program, many of the current servicers (ie: Bank of America, Citi, Wells Fargo) are all telling their clients that they must go through them for HARP. This is another tactic used by them to make the borrower believe they have no other options and gouge them with interest rates. Many banks have been quoting rates for HARP that are above market rates. The HARP program is NOT a loan modification, nor is it a negotiation with your lender.


  1. Does this loan include closing costs?
    1. Yes, a HARP transaction is similar to a conventional refinance which will include origination, underwriting, processing, title, escrow, pre-paid taxes, insurance and per-diem interest. Different lenders will offer different rates and closing costs, make sure you work with the company that you feel most comfortable with and who can benefit you most.


  1. Do I need an Appraisal?
    1. In most cases NO, I’ve seen about 10-15% of my current clients needing an appraisal. The system has an automated valuation model built into the program which will determine the value of the home based on comparable sales and if the system is confident that you have submitted an accurate value it will not require an appraisal.


  1. I had a property go into short sale, when can I get HARP?
    1. There is a 4 year seasoning requirement for short sales, your credit must have been repaired in that time as well as no mortgage late payments in the past 12 months.


  1. One of my properties was foreclosed on, when can I get financed?
    1. Seven years must have passed from the completion date of the foreclosure. If the foreclosure was a deed-in-lieu of foreclosure the minimum time period is 2 years to re-establish credit under extenuating circumstances but in most cases 4 years.


  1. I’ve filed bankruptcy, how soon am I able to get refinanced under HARP?
    1. Four years must have passed and credit must have been re-established from the discharge date or a 4 year period from the dismissal date. Under extenuating circumstances you may be able to get approved after 2 years, no exceptions under 2 years.


  1. I’ve received a loan modification in the past, am I eligible?
    1. If you’ve received a loan modification on the property you’re trying to refinance under HARP you are NEVER eligible for the program under open access. This may be different with the same servicer guidelines. I have confirmed this through underwriting. They treat a loan modification similar to a short payoff or restructured debt (settled second mortgage, reduction in principal…etc)


  1. Is there a pre-payment penalty on the loan?
    1. No, you can pay the loan off in 5 years, there is no pre-payment penalty on these loans.


  1. Does HARP include a Principal Reduction?
    1. No, A Principal reduction is only able to be obtained through a loan modification.


  1. Can I consolidate both my 1[SUP]st[/SUP] and 2[SUP]nd[/SUP] mortgage?
    1. No, consolidation of a 1[SUP]st[/SUP] and 2[SUP]nd[/SUP] would be considered a cash out refinance and this transaction is not eligible for underwater borrowers under HARP. The 2[SUP]nd[/SUP] mortgage will have to be subordinated (agree to stay second position.) To this day, I have not yet had one company give me a hard time with the subordination. If they don’t agree to stay second position they are adding additional risk of foreclosure on the property.


  1. Can I pull cash out to make upgrades?
    1. NO, Cash out transactions are NOT allowed, the max cash back is $250.00


  1. Why is Fannie Mae/Freddie Mac telling me I can’t refinance because of “Credit Enhancements”?
    1. This is a very hot topic and includes loans with Lender Paid Mortgage Insurance. Existing loans that are subject to recourse and/or indemnifications agreements, and the coverage was necessary to meet Fannie Mae minimum credit enhancement requirements applicable to loans with LTVs in excess of 80% remain ineligible for Refi Plus (DU or manual). In most cases the LPMI was added after the loan was funded, this is what is creating the “Credit Enhancement” road block many people are running into. You would want to discuss your potential options with Fannie Mae or your current lender.


  1. I’ve received expanded approval feedback from Fannie Mae, is there anything I can do?
    1. There are certain things that can be done to overcome the expanded approval feedback, at this time I’d like to keep that information proprietary. However if you’re trying to be approved after receiving Expanded approval feedback, shoot me an e-mail and I can give you some advice.


  1. How much cash reserves do I need to qualify?
    1. For an owner occupied home you will need to show 2 months of reserves in liquid assets. For non-owner occupied residences you must show 6 months of reserves.


  1. Is there anything that helps my application be approved?
    1. Yes, here’s what I’ve seen help: Positive net worth, high income, good credit history and scores, reducing the term of the loan, paying closing costs out of pocket, ASSETS (401K, Stocks, Bonds, Money Market, IRA, CalPERS, CalSTERS…etc)


  1. Can I add a co-borrower to the loan?
    1. Yes, one of the borrowers on the old loan must remain on the new loan.


  1. Can I remove a borrower from the loan?
    1. Yes, you must provide evidence that the remaining borrower has made the mortgage payments out of their own funds for the past 12 months. The remaining borrower will also still have to qualify.


  1. Do Property Taxes & Insurance HAVE to be impounded?
    1. Under most circumstances – Yes. There are exceptions to this rule: If your current LTV is less than 90% and your loan did NOT have impounds you can keep them separate. ANY loan-to-value above 90% will require impounds.


  1. Can I refinance an Investment Property or Second Home under HARP?
    1. Yes, Investment properties and second homes are eligible under HARP.


  1. Does HARP require Mortgage Insurance?
    1. No, the only time HARP would require mortgage insurance is when the loan being refinanced currently has MI. If your loan has MI now, the same coverage will be transferred to the new loan. If you paid MI in a single premium you will not have an additional payment on the new HARP refinance for MI because you’ve already paid it in full.
    2. If you have LPMI (Lender Paid Mortgage Insurance) at many times the MI was built into the interest rate you’re paying now, that will change to a monthly premium rather than through the interest rate.


  1. Is there a maximum number of properties I can have financed?
    1. Freddie Mac – Yes, you cannot have more than 4 properties financed.
    2. Fannie Mae – If the subject property is owner occupied, there is no limit to the number of properties that a borrower may own or have financed. If the property is an investment home the maximum number of properties may own or be obligated on is 4. There is an exception to the rule, as long as you enter into a fixed rate product via the HARP program you can have more than 4 properties financed. Ultimately Fannie Mae DOES have a multiple property program available. Under this program you must have 6 months of reserves on EVERY property you own.


If you have any further questions, please don't hesitate to contact me on my information below.

I'm here to help!
 
Last edited:

Heide

LoanSafe Member
May 10, 2012
21
0
0


  1. Can I consolidate both my 1[SUP]st[/SUP] and 2[SUP]nd[/SUP] mortgage?
    1. No, consolidation of a 1[SUP]st[/SUP] and 2[SUP]nd[/SUP] would be considered a cash out refinance and this transaction is not eligible for underwater borrowers under HARP. The 2[SUP]nd[/SUP] mortgage will have to be subordinated (agree to stay second position.) To this day, I have not yet had one company give me a hard time with the subordination. If they don’t agree to stay second position they are adding additional risk of foreclosure on the property.
I've spoken with dozens of professionals in all facets of the industry (govt and private) and no one can even begin to understand why PNC is denying our subordination on our HARP2 refi (http://www.loansafe.org/forum/harp-mortgage-loan-program/48291-harp2-approved-2nd-pnc-denying-subordination.html#post403653) ... It has me so incredibly frustrated, I can't even begin to explain it.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,050
161
63
San Diego, California
www.loansreduced.com
I havent had any issues with subordinations, if they don't agree to subordinate they are adding additional risk to foreclosure. Not sure what your lender is being told but that doesn't sound right.
 

Nick_

LoanSafe Member
Jun 24, 2012
8
0
0
Columbus, Ohio
Would 2 months cash reserves requirement be equal to the original payment, or new one? Would that be payment and interest only or taxes and insurance too?

I am trying to align myself before I call. I have a balance on a credit card that I usually payoff at the end of the month. I may have to let it ride and pay the minimum so I can show a cash reserve in my checking.

One last question... Wife is no longer employed and we share a bank account. Is it possible to remove her from the first loan if she is still on the second?

Thank in advance and also for your recommending the HARP route in another thread!

Nick
 
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Nick_

LoanSafe Member
Jun 24, 2012
8
0
0
Columbus, Ohio
Sorry, forgot one important question... on average how long do you think it would take from first phone call to approval assuming there are no major roadblocks? I would be going through same lender (CCO Mortgage) the HARP refi.
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
Hi Erik. Great post. Can you tell me if the loan modifications associated with the recent settlement by the US Department of Justice and State Attorneys General (Federal Government & Attorneys General reach landmark settlement with major banks | NationalMortgageSettlement) with major servicers, specifically Bank of America, require the loan modification to be on your primary residence?
There is a number here to contact BofA to see if your loan is eligible.


Among other criteria:



  • you must be at least 60 days delinquent as of January 31, 2012 as well as at the time your loan is evaluated for the modification.
  • you must owe more on your mortgage than the value of your home.
  • your loan must be owned by Bank of America or held by a mortgage investor that has delegated authority to Bank of America.
  • you must have a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of your gross household income.
If your loan is not owned by Bank of America or another participating investor, it will not be eligible for the program. Freddie Mac, Fannie Mae, the Federal Housing Administration (FHA) and the Veterans Administration (VA) are not participating in the programs provided under the settlement. Customers whose loans are owned or insured by one of those entities are not eligible for relief through these programs.



You will be notified by mail if you are eligible for a principal reduction. If you want more information about your potential eligibility, you can call 1.877.488.7814 (Mon-Fri 8am-12am ET, Sat 8am-8pm ET, Sun 3pm-12am ET).