HARP 3.0 Bill Gets Renewed Push In Congress

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HARP 3 : The Menendez-Boxer Bill / Responsible Homeowners Act Of 2013

A third HARP 3.0-like mortgage bill has been introduced in Congress.

Following the failed Responsible Homeowner Refinancing Act of 2012, Senators Robert Menendez and Barbara Boxer have re-drafted their landmark refinance bill meant to help underwater U.S. homeowners get access to today’s low mortgage rates.

The Responsible Homeowner Refinancing Act of 2013 proposes to eliminate certain closing costs, including the cost of home appraisal, and to make it simpler for homeowners to “change servicers” via the Home Affordable Refinance Program (HARP).

The Next HARP : No Job Verification, No Income Verification?

The Home Affordable Refinance Program (HARP) was first launched in February 2009. It gave homeowners whose mortgages were securitized by Fannie Mae and Freddie Mac, and whose homes had lost value since the housing market peak, the ability to refinance into new, lower mortgage rates without incurring new private mortgage insurance (PMI) costs.

Via HARP, a homeowner who had put 20% down on a home, then subsequently lost that equity, could refinance without requiring PMI.

In 2011, HARP coverage was expanded into the program we now call HARP 2.0.

HARP 2.0 eliminated the original HARP’s 125% maximum LTV limitation, which allowed for unlimited loan-to-value, helping homeowners get access to HARP in hard-hit states such as Florida and Nevada, where home values had dropped by fifty percent or more.

To further help such underwater homeowners, the new Home Affordable Refinance Program added loan fee caps for homeowners whose mortgages exceeded a certain loan-to-value; and for homeowners refinancing into a 15-year fixed rate loan.

In roughly 3 years, the original HARP reached one million U.S. households. It took HARP 2.0 just eight months to do the same.

In an effort to reach even more U.S. homeowners, the Responsible Homeowner Refinancing Act of 2013 attempts to go further.

Key Upgrades : Responsible Homeowner Refinancing Act of 2013

The Menendez-Boxer bill aims to put HARP in the hands of more U.S. homeowners. To that end, the program aims to loosen around the edges with respect to income, employment, appraisal, and closing costs.

First, the Responsible Homeowner Refinancing Act proposes to reduce upfront loan fees for all HARP borrowers.

Under the current system, borrowers with ultra-high LTVs may be subject to fewer upfront closing costs as compared to borrowers with loan-to-values between eighty and one-hunded-five percent.  This is strange in that loans over 125% typically represent a higher risk than an 85% LTV loan.

The new HARP bill proposes to level out fees for all eligible homeowners.

Second, the Responsible Homeowner Refinancing Act would formally remove income and employment verifications from the HARP approval process.

Currently, HARP boasts lax requirements on both issues. The new HARP would codify this. Regardless of whether you’re employed, unemployed; earning verifiable income, newly commissioned, or without wages, your HARP approval will be unaffected.

HARP already requires that refinancing homeowners have good payment history. The Responsible Homeowner Refinancing Act suggests that this trumps the need to verify income and employment.

This is a similar philosophy to the FHA’s policy on the FHA Streamline Refinance; and the VA’s policy for its Interest Rate Reduction Refinance Loan (IRRRL).

And, third, the Menendez-Boxer bill would require Fannie Mae and Freddie Mac to create alternate home appraisal methods; ones which don’t cost as much as a “full appraisal” requiring a home visit.

Currently, Fannie Mae and Freddie Mac allow for automated appraisals which show values within a certain “expected range”.

Other HARP Guidelines Expected In Menendez-Boxer Bill

The Menendez-Boxer Bill makes few other changes to the existing HARP 2.0 program guidelines. Save for a program extension date, qualification looks identical.

The Responsible Homeowner Refinancing Act of 2013 would be available to homeowners with :

  1. A mortgage currently owned or guaranteed by Fannie Mae or Freddie Mac
  2. A mortgage securitized by Fannie Mae or Freddie Mac on or before May 31, 2009
  3. A mortgage which has not been previously refinanced via HARP, except for Fannie Mae loans refinanced under HARP between March and May 2009
  4. A mortgage with a loan-to-value ratio of 80% or greater
  5. A mortgage which is current and with perfect payment history dating back 6 months

That said, because of the recent Home Affordable Refinance Program extension to December 31, 2015, there’s talk that a HARP 3.0-like piece of legislation would move forward the program’s start date from May 31, 2009 to May 31, 2010, or something similar. This would open HARP 3.0 to U.S. homeowners whose mortgages were originated between June 1, 2009 and May 31, 2010.

There’s also talk about allowing (or specifically disallowing) the “Re-HARP” — a refinance of a mortgage which has already used the HARP program once.

Check Your Personal HARP Eligibility

For today’s HARP homeowners, the Responsible Homeowner Refinancing Act of 2013 would make the refinance process faster, smoother, and less costly. And with the typical HARP homeowner lowering mortgage rates 1.8 percentage points, the savings would be large.

Check your HARP eligibility, and today’s program rates. It’s free and there’s no social security number required.

January 2013

3 Loans That Are Tough to Refinance

Jan. 12, 2013
PHOTO: Refinancing an auto loan may be difficult, according to Edmunds.com.

Advertised rates for car loans, mortgages and even some credit cards are tantalizingly low, promising big savings for borrowers who can refinance. But just because you see that rate advertised doesn’t mean you’ll qualify.

Here are three loans that can be difficult to refinance, as well as strategies for lowering your rate if you are stuck with one of them.

Used Auto Loan

If you bought a new vehicle with little or no money down, or if you’re driving a clunker, refinancing it may be tough. That’s because you may be upside down on your loan — you owe more than the vehicle is worth; or the value of your vehicle is so low that the lender may not want to be saddled with it if you default.

Lenders who finance car loans are typically looking at the borrower’s credit and income, as well as the value of the car as collateral for the loan. “If you have strong credit then you may be able to refinance,” says Phillip Reed, Edmunds.com Senior Consumer Advice Editor. “But if your credit is weak then the collateral may not be a factor in helping (you) get a loan.”

However, that doesn’t mean you are completely out of luck. You may be able to refinance a three-year loan to a five-year one, for example, thereby lowering your monthly payment, says Reed. Another option: “You may be able to roll your negative equity into a new auto loan,” he says. “It’s a terrible thing, but people do it all the time. They keep getting in deeper and deeper (debt).” He adds that in some cases the dealer may be offering a rebate on the new car that can help offset some of the negative equity.

How to refinance: Check with three lenders — such as a local bank or credit union, or online lenders — to find out what’s available. Restrict your loan shopping to a two-week period. If you stretch out the process you may wind up with multiple inquiries on your credit reports, which can hurt your scores.

The alternative: Sell the vehicle yourself and find a way to come up with the cash — or line up a personal loan — to pay off any remaining balance. Then buy an economical used car that won’t lose as much value.

Despite some recovery in the housing market, an estimated 10 million – 14 million or so homeowners are in negative equity — meaning their home is worth less than they owe. And an estimated 2.3 million have less than 5% equity in their homes. That lack of equity makes it very hard to refinance, and makes the news about historically low rates a painful tease for millions who would like to be able to take advantage of them.

There aren’t a lot of truly great options for the majority of homeowners in this situation. The Home Affordable Refinance Program (HARP) was expected to make it much easier for these homeowners whose loans are owned by Fannie Mae or Freddie Mac to refinance into a lower rate and smaller payment, but the program has been hampered by a lack of interest from the lending community. And if you are successful in refinancing under HARP or another program, you may wind up in another trap: paying for mortgage insurance for many more years to come. Finally, if your loan is not owned by Freddie or Fannie, or if you have a large second mortgage that’s also underwater, you may be stuck.

[Related article: Another Good Mortgage Refinance Program Gets Its Wings


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