Arizona homeowners are anxious to refinance their underwater mortgages utilizing the HARP 2.0 program, with no appraisal and limited income verification.
Across the U.S., eleven million borrowers who have Fannie Mae or Freddie Mac guaranteed loans could be eligible for refinancing. A few of the big boy banks will roll out modified versions in the next couple of weeks and others are already taking applications. The long delay (remember President Obama announced this program in October) is due to the automated underwriting systems (AUS) upgrades. Without an AUS approval, there is no guarantee Fannie Mae or Freddie Mac will purchase the HARP 2 loans. The automated underwriting switch will be turned on sometime in March. The highlights of the program are the following:
- The current loan is owned or guaranteed by Fannie Mae or Freddie Mac
- It was sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The loan’s current loan-to-value (LTV) is greater than 80%
- No mortgage lates in the previous six months and only one mortgage late in the past twelve months.
President Obama announced yet another refinance program on Wednesday to assist non-agency mortgages NOT guaranteed by Fannie Mae, Freddie Mac, FHA or VA. Half of all US mortgages, approximately 30 million home loans, are owned by non-government lenders. This plan would utilize FHA for the refinances and will require Congressional approval. According to the President, the lenders will take a haircut for borrowers who owe more than 140% of current value. Also, Uncle Sam is NOT paying for this new unnamed plan. Instead, a fee
will be imposed on the banks. A couple of key points were disregarded during his speech: The gut-wrenching monthly mortgage insurance premium currently charged on FHA loans and FHA’s default rate that is eroding their reserves. There was no mention of the rapidly declining Jumbo market, once again ignored.
The Harp 2.0 program will no doubt help Arizona homeowners who wish to keep their underwater homes and allow them to take advantage of today’s interest rates on their current loan balances. The other plan announced Wednesday, if Congress approves it, will mandate principal reduction but slap a hefty monthly mortgage insurance premium. Will either assist in the recovery of the Arizona economy and our housing market? It may be years before we know the answer.