Yesterday, in an effort to enable more borrowers to refinance their home mortgages, the Federal Housing Finance Agency, along with Fannie Mae and Freddie Mac (the Enterprises), announced several changes to the Home Affordable Refinance Program (HARP) . The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.
New program enhancements include the following changes:
- Certain risk-based fees for borrowers who refinance into shorter-term mortgages will be eliminated and certain fees for other borrowers will be lowered;
- The 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac will be removed;
- Certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac will be waived;
- A property appraisal will no longer need to be done where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
- The end date for HARP has been extended until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.
An important element of these changes is the encouragement, through the elimination of certain risk-based fees, for borrowers to use HARP to refinance into shorter-term mortgages. Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today’s low interest rates by shortening the term of their mortgage.
Operational details about the HARP changes should be provided to mortgage lenders and servicers by Nov. 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.
There are, of course, eligibility requirements that borrowers must meet.