Officially, the the HARP 2 program started December 1. Unofficially, most lenders won’t be offering it until after March 15th, 2012. Let’s explore and understand why?
The original HARP program, which allows a home owner to be underwater on their home mortgage loan up to 125% loan-to-value is available today.
THE BIGGEST DELAY: Simple. Software. When a lender “underwrites” a loan, they actually do so through an AUS, which stands for Automated Underwriting Systems. The computer software evaluates the application, and gives an answer. The underwriter then verifies the computers decision. For example, the software may give a YES answer, then ask for pay stubs to verify income. The underwriters job is to then review the pay stubs to make sure the submitted income is the actual income.
Both Fannie Mae and Freddie Mac need to reprogram their computers, and they’ve indicated this will become effective March 15th.
BENEFITS TO LENDERS OF AUS: Can a lender “manually” underwrite a file? Sure, but the biggest benefit of submitting a file through the automated systems is all about liability. Contracts with Fannie Mae and Freddie Mac protect a lender against liability for underwriting mistakes made by the lender of the original mortgage if the software said YES. Therefore smart lenders are not likely to take on the additional risk of a manual underwritten file.
THE RULES: Another major issue is simply getting the rules written, and distributed up and down all the lender channels. While Fannie Mae and Freddie Mac have indicated what their rules are, remember that they don’t actually lender to consumers. Lenders lend. Fannie Mae and Freddie Mac simply buy loans from lenders. Therefore there is still a large amount of risk to lenders. Each individual lender needs to review new rules, consider the risk, decide if they even want to participate in the enhanced HARP 2 program, then write their rules and push them out to the Loan Officers on the street.