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what is HARP - Home Affordable Refinance Program?


smokin5s

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I've been seeing tons of advertisements about it lately and I'm trying to figure out what exactly it is and if it's a good thing or not. Can someone explain to me the difference between HARP and a standard 30 year mortgage?

 

Thanks!

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The beginning of the Wiki actually seems pretty straightforward

 

Millions of borrowers found themselves in a difficult predicament after the U.S. housing bubble burst in 2008. As inventories soared nationwide, home prices plummeted. Many new homeowners saw the value of their homes drop below the balance of their mortgages, or nearly so. Later, these same homeowners were prevented from taking advantage of lower interest rates through refinancing, since banks traditionally require a loan-to-value ratio (LTV) of 80% or less to qualify for refinancing without private mortgage insurance (PMI).[1]

 

Take for example a house that was purchased for $160,000 but is now worth $100,000 due to the market decline. Further, assume the homeowner owes $120,000 on the mortgage. In this scenario, the loan-to-value ratio would be 120%, and if the homeowner chose to refinance, he would also have to pay for private mortgage insurance. If the homeowner were not already paying for PMI, the added cost could nullify much of the benefit of refinancing, so the homeowner could be effectively prohibited from refinancing.[2]

 

 

Sounds like a ok option if you dont have equity and do have high interest.

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https://www.harp.gov/about

 

It's a relief program through re-financing. If you were one of those people who took out a mortgage prior to the financial crisis, and now the equity of your home as evaporated and you are stuck with a high interest rate - HARP helps you get out of that situation. It is limited to GSE investor (Fannie and Freddie) mortgages though.

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ok, so because I have more than 20% equity in my property and my interest rate is below 4.5% then it's probably not worth me looking into correct?

 

Correct. You don't qualify.

 

And be glad, thats a good thing

 

All correct. HARP is a great product for those that are underwater on their current mortgage. HARP rates are typically lower than the clients current rate...but a bit higher than market rate to make up for the lack of equity.

 

If you have 20+% equity and a 30yr rate under 4.5% you are probably in a good spot. Unless you're looking to shorten your term and take advantage of a lower interest rate...or have plans to sell in 7 or less years and want to increase your cash-flow with an ARM.

-Marc

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Correct. You don't qualify.

 

That is not correct. Being underwater is not a acquirement for HARP. There may not be a benefit to a refinance in his particular situation, but to clarify that does not mean he does not qualify for it.

 

Even if you have equity you may very well qualify and be able to save money and *possibly* be able to do it all with no appraisal needed through HARP. Even if you dont qualify for HARP and you have that much equity, you may still be able to refi with no appraisal and save $$ or reduce term. At 4.5 in a 30yr today though, your likely good unless you need to reduce term or cash out.

 

The only people that DO qualify for HARP or HAMP (the modification end of the roll out) are people that have a loan that was purchased or originated by Fannie Mae or Freddie Mac (the GSEs) prior to June 1 2009. Roughly 75% of conventional loans are purchased by the GSEs.

 

If you dont fit that since criteria, than no mater what the guy on the other end of the line is telling you, your not signing up for a HARP refinance

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That is not correct. Being underwater is not a acquirement for HARP. There may not be a benefit to a refinance in his particular situation, but to clarify that does not mean he does not qualify for it.

 

 

https://www.harp.gov/Eligibility

 

Your current loan-to-value (LTV) ratio must be greater than 80%. Calculate your LTV ratio with this tool.

 

Yes it is technically true that you don't need to be underwater (you can have an LTV of 81-99% and not be considered underwater but qualify), in this particular situation he doesn't qualify because his first lien LTV would be below 80%.

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https://www.harp.gov/Eligibility

 

Yes it is technically true that you don't need to be underwater (you can have an LTV of 81-99% and not be considered underwater but qualify), in this particular situation he doesn't qualify because his first lien LTV would be below 80%.

 

 

I can show you closed loans that went through HARP that were under 80% LTV. In most cases, it was because an appraisal waiver was given vs. in the most recent example a similar rate and term refinance underwritten though Freddie Mac that did not offer the waiver. I am saying with confidence there is no hard LTV floor with HARP. ;)

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https://www.harp.gov/Eligibility

 

 

 

Yes it is technically true that you don't need to be underwater (you can have an LTV of 81-99% and not be considered underwater but qualify), in this particular situation he doesn't qualify because his first lien LTV would be below 80%.

 

I can show you closed loans that went through HARP that were under 80% LTV. In most cases, it was because an appraisal waiver was given vs. in the most recent example a similar rate and term refinance underwritten though Freddie Mac that did not offer the waiver. I am saying with confidence there is no hard LTV floor with HARP. ;)

 

Just waiving that magical mortgage brokers wand around and getting shit done... :lol::rolleyes:

 

If the LTV was under 80% verified by an appraisal...it wasn't HARP. If an appraisal waiver was used, then in the system you marked the LTV as above 80% using an artificially lower value. It's that simple.

-Marc

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All correct. HARP is a great product for those that are underwater on their current mortgage. HARP rates are typically lower than the clients current rate...but a bit higher than market rate to make up for the lack of equity.

 

If you have 20+% equity and a 30yr rate under 4.5% you are probably in a good spot. Unless you're looking to shorten your term and take advantage of a lower interest rate...or have plans to sell in 7 or less years and want to increase your cash-flow with an ARM.

-Marc

 

Saying ARM is dangerous... I can't believe people fall for that.

 

I would love to shorten my term, but I'm 8-9 years into my 30 year term at this point so even doing a 15 I'm not sure really how much that gains me. (besides 6 years without a mortgage)

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Just waiving that magical mortgage brokers wand around and getting shit done... :lol::rolleyes:

 

If the LTV was under 80% verified by an appraisal...it wasn't HARP. If an appraisal waiver was used, then in the system you marked the LTV as above 80% using an artificially lower value. It's that simple.

-Marc

 

 

 

If the LTV was under 80% verified by an appraisal...it wasn't HARP. If an appraisal waiver was used, then in the system you marked the LTV as above 80% using an artificially lower value. It's that simple.

-Marc

 

To clarify we are not a broker. We sell direct to Fannie, and service our own loans. ;). Only the 1% of super wacky shit goes broker.

 

If the AUS offered an appraisal waiver, why would it be verified by an appraisal? :confused: LTV with the waiver was under 80%. I admit it was a unusual scenario (California, super equity but could not HARP previously due to a BK) but it happened, and it closed.

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Saying ARM is dangerous... I can't believe people fall for that.

 

I would love to shorten my term, but I'm 8-9 years into my 30 year term at this point so even doing a 15 I'm not sure really how much that gains me. (besides 6 years without a mortgage)

 

There is absolutely nothing wrong with an ARM loan...I write a LOT of them. It just totally depends on the individual borrowers needs and situation. Every ARM I sell has minimum/maximum adjustments set on very specific terms that the client fully understands prior to closing. And they also have a lifetime cap on how much they can increase/decrease.

 

My portfolio ARM options are awesome for clients that are going to be in their current home for 5-7 years and want to pay less than $400 TOTAL in closing costs...or if they are looking for a way to avoid FHA with bruised credit scores and not get killed in closing costs.

 

The misconception on 'dangerous ARM's' comes from the wild-west of mortgage origination (think 2000-2007 pre-bubble) when you had originators selling ARMs that would qualify a borrower for the initial deal...but would adjust so randomly and so often that it pushed the client into delinquency and ultimately foreclosure. Predatory lending at its finest by a LOT of mortgage brokers/bankers/new home builders.

 

If you are planning on staying in your home for the long run...there probably is not a benefit to refinance right now unless you have a need for cash in hand at a low interest rate.

 

To clarify we are not a broker. We sell direct to Fannie, and service our own loans. ;). Only the 1% of super wacky shit goes broker.

 

If the AUS offered an appraisal waiver, why would it be verified by an appraisal? :confused: LTV with the waiver was under 80%. I admit it was a unusual scenario (California, super equity but could not HARP previously due to a BK) but it happened, and it closed.

 

Mortgage broker...mortgage banker...semantics. And your servicing portfolio is what...made up of basically only the loans you can't sell?

 

There is always a one-off situation. I wouldn't try and sell that as the norm and misrepresent yourself.

-Marc

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Mortgage broker...mortgage banker...semantics. And your servicing portfolio is what...made up of basically only the loans you can't sell?

 

There is always a one-off situation. I wouldn't try and sell that as the norm and misrepresent yourself.

-Marc

 

 

No our Service portfolio is 95% Fannie/Freddie/Ginnie conforming and 5% non conforming portfolio products.

 

You can read my previous post. I never said it was the norm, just that the statement that you had to be underwater was not correct. ;)

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Saying ARM is dangerous... I can't believe people fall for that.

 

I would love to shorten my term, but I'm 8-9 years into my 30 year term at this point so even doing a 15 I'm not sure really how much that gains me. (besides 6 years without a mortgage)

 

I love ARM's lol. Marc has done a few for me. In the last 10 years, ARM rates have beaten Fixed from what I remember. If you get a good max increase rate, they're the way to go.

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I was happy to go with an ARM loan from Mark, I got cash out, and have drastically improved my wife and my credit by paying off most other debt. We planned on converting to a 30 year fixed, we may do that or we may sell. Either way Mark made sure we understood everything going on and it was certainly our best option at the time.
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I love ARM's lol. Marc has done a few for me. In the last 10 years, ARM rates have beaten Fixed from what I remember. If you get a good max increase rate, they're the way to go.

don't you flip houses though so you don't keep them long? No way would I ever sign up for an ARM even though I could it's too dangerous for my interest.

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don't you flip houses though so you don't keep them long? No way would I ever sign up for an ARM even though I could it's too dangerous for my interest.

 

I don't finance my flip houses, they're all cash. On the 3 ARM's I've done with Marc, 2 have been personal houses and 1 was a rental property.

 

Remember- there is a cap to how high an ARM can go now (as Marc said, it's not like the "olden days"). If you get a 3.5% rate it may cap out at like 5.5%. And it may never get there...

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