harp interest rates – Minnesota Mortgage and Real Estate Daily Blog

Has your Minneapolis area home LOST VALUE? HARP 2.0 can help you refinance!

Minneapolis, MN: What is HARP? HARP stands for Home Affordable Refinance Program, an initiative from the Federal Housing Finance Agency (FHFA) to assist homeowners whose homes are now worth less than what they owe. And just recently, new enhancements to the program were announced, making refinancing options available again to an estimated one million more homeowners.

If you are a responsible homeowner but the current marketplace loan-to-value (LTV) requirements and need for a new appraisal have made it difficult or impossible for you to refinance at today’s record low interest rates, lenders may be able to help you without needing a new appraisal or meeting previous LTV requirements.

The HARP “Special Refinance Program,” is designed to help up to 9 million American families refinance their loans to a payment that is affordable now and into the future. This program is aimed at helping responsible homeowners “refinance” their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.

You may be eligible for a HARP 2.0 refinance if:

The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
The current loan-to-value (LTV) ratio must be greater than 80%.
The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

If you answered YES to these questions, Click HERE to Apply for a HARP Refinance in the Minneapolis, MN area.

Why you should wait until April to get a HARP 2.0 Loan

Just a few years ago, consumers with weaker credit getting a conforming mortgage loan (one designed to be sold to Fannie Mae or Freddie Mac) got a great deal. If you barely qualified with a low 620 credit score, you got the exact same rate as someone with an excellent 800 credit score.

better_deal — Wait for better HARP 2.0 Interest Rates

When the mortgage markets collapsed and the housing agencies started hemorrhaging cash, they instituted new fee policies known as Loan Level Pricing Adjustments (LLPA) and Adverse Market Delivery Charges (AMDC) as a means to fix their balance sheets on the backs of homeowners that were still able to obtain loans.

The fees were intended to price loans based on the risk inherent in each loan. LLPA is the more significant of the two fees. It adds fees to a loan based on loan type (purchase, rate and term refinance or a cash out refinance), loan to value, and credit score. To illustrate the impact of the LLPA, a borrower with a 620 credit score will pay a rate nearly 1% higher than a borrower with a 740 credit score.

Because of the inherent risk of HARP refinance, most consumers over 80% loan-to-vale have been hit hard by AMDC and LLPA requirements

HARP 2.0 – Best Change Worth Waiting For

As part of HARP 2.0, AMDC and LLPA rules have been changed, providing consumers who wait a potentially much better interest rate.

Reduced fees charged by the agencies on loans with a loan to value in excess of 80%.
On loans with amortizations of 20 years or less, the LLPA and AMDC are eliminated.
On 25 and 30 year loans, the cap is reduced, which means the borrower with the lower score in the example above saves another .25% in rate.
Removal of loan to value cap on fixed rate mortgages (effective March 17th 2012) – no equity, no problem. In fact, negative equity refinances will be allowed.

Eliminating the fees on 15 and 20 year loans is significant. Rates on those loans are already well under 4%, so this should open up HARP refinance opportunities for borrowers that are interested in the rapid principal reduction that comes with shorter amortization mortgages.

Not Until After March

When lenders underwrite loans, the first step is to log into Fannie Mae or Freddie Macs computers to get an underwriting decision. These two agencies have indicated lenders won’t be able to do that until sometime around March 17th. To get the better mortgage rates from HARP lenders, you need to wait!

One caution about the changes to the loan to value cap; sometimes lenders do not adopt changes announced by the agencies word for word. Some overlay their own underwriting guidelines and they are always more conservative. While Fannie and Freddie may state they don’t have a loan to value limit for fixed rate HARP loans, many lenders will have a cap.

The agencies continue to tweak their programs with the goal of improving the performance of the loans in their portfolio. If you haven’t refinanced yet, maybe this change is the one that will benefit you.