Us Treasury Opposes Extending Cutoff Date For Harp Refinancing

Erik Sandstrom

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The US Treasury has announced that it is “opposing allowing borrowers with mortgages originated after mid-2009 to become eligible for the Home Affordable Refinance Program” said the agency’s chief housing-finance adviser.

Right now only the borrowers with loans originated by May 31st, 2009 are currently eligible for the HARP Program, which allows homeowners who owe more than the home is worth the ability to refinance as long as their loan is backed by Fannie Mae & Freddie Mac. They have also recently extended the program to borrowers who had loans originated prior to May 31st, 2009 but were not acquired by Fannie Mae or Freddie Mac until after that date.

How do you find out if your loan is backed by Fannie Mae or Freddie Mac?
Fannie Mae Loan Look up
Freddie Mac Loan Look up

Type your information in the above link, make sure you spell everything exactly as it appears on your mortgage statements and it will tell you not only if you have a Fannie/Freddie backed loan but also when the loan was acquired by them.

Michael Stegman, the Treasury’s housing adviser said “Very few homeowners whose loans were originated after the cut-off date are underwater and advancing the date would do more harm than good by prolonging market and investor uncertainties.”

I think the problem with the statement above is that people who are HARP eligible still are unaware that they may be eligible to refinance under this program. Most borrowers have a theory that if they owe more than the home is worth that they can’t refinance which is true in most cases unless you have a government backed loan. HARP (Fannie & Freddie) & FHA Streamline refinances can still help people that are underwater. Why would this prolong the market and investor uncertainties? In my opinion it’s only going to help the market continue to recover as it allows people that are at risk of foreclosure the ability to obtain a more affordable payment. How can that possibly do more harm than good?

Almost 3 million homeowners have completed refinances under the program that was released May 31st, 2009 and only about 1 million of those borrowers were actually underwater. “Another 2 million borrowers could be eligible even if the cutoff date is not changed” Stegman said.

We’re going to see some interesting things happen in the near future with Fannie Mae & Freddie Mac whom are pushing towards issuing a single security. This would eliminate or reduce the pricing gap at which Freddie Mac and Fannie Mae issue securities by linking the two together.
 

Moe Bedard

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Thanks for the info Erik.

In your experience, have you seen a lot of borrowers who received a loan after May 31st, 2009 that are currently underwater or are they above water barely breathing?
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
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Hey Moe,
Not a problem! I saw that and immediately had to make everyone aware.

In most cases I would say the borrowers who purchased after May 31st, 2009 do have at least a small percentage of equity. The benefit of using the HARP program in certain circumstance would be to take advantage of the low rates and also potentially avoid mortgage insurance if they're above 80% Loan to Value. The program does require that you're at least above 80% or conventional financing would be required. HARP also does not weigh as heavily on FICO scores than other programs, meaning you can get a better rate.

This is another really good reason why it's important to work with someone that has the knowledge of these programs and what may or may not be more beneficial than the others depending on the scenario.

The homeowners that qualify for HARP do have to qualify based on income...etc. To take away a program that still has an enormous amount of borrowers that are unaware they qualify could be toxic to the recovery among other things.