Many of you have either heard or read about last Monday's announcement from the Obama administration along with Fannie and Freddie about coming changes to the Home Affordable Refinance Program (HARP) ….now being coined as HARP 2.0.
HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates. It is targeted for borrowers with loans closed and sold to the Fannie or Freddie on or before May 31, 2009. One of the major hurdles for California Homeowners is the current limit to the LTV of 125%....and most of our investors limit them to 105%! They do that because currently the risk to the lender for buyback is so high.
The Key changes that have everyone excited is:
1. Removal of LTV limitations….giving a lot of borrowers the chance to refi for the first time.2. Fannie and Freddie will drop the “reps & warranties”….meaning they won’t come back to the lender to buy the loan back if the borrower then defaults sometime soon.
These two changes alone could open the door to more investors participating and a tremendous amount of opportunity for homeowners to reduce their payments.
Fannie/Freddie plan to issue guidance with operational details about the HARP changes to mortgage lenders by November 15th. Remember that lender participation in HARP is not mandatory and each investor will vary on their willingness to play and their overlays…..So we expect that we will start hearing from our investors sometime around 11/15 and shortly after.
Remember that often programs do now always work the way the politicians and agency s claim they will when they finally hit the streets, because the investors who buy the loans ultimately determine the guidelines not the politicians.
Click here to read the announcement from FHFA.
