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HARP Needs More Than A Deadline Extension

Homeowners who haven't refinanced their mortgage because they owe more than their home is worth might have another shot at refinancing now that the Federal Housing Finance Agency (FHFA) has extended the Home Affordable Refinance Program (HARP) until Dec. 31, 2015.

That's the good news.

The bad news is that the HARP rules remain unchanged, and while the extension might help some homeowners, others will still face the same refinance hurdles.

No HARP 3.0

Rumors have been swirling for some time that adjustments might be made to the current HARP 2.0 guidelines, says Kirk Chivas, chief operating officer at First Commerce Financial, a mortgage company in Wixom, Mich.

For instance, some borrowers could benefit from a later loan-origination-eligibility date or the ability to use HARP more than once, says Chivas. The current guidelines require loans to be originated on or before May 31, 2009 and restrict HARP to one refinance per borrower.

FHFA Senior Policy Analyst Michelle Murphy says there are no plans at this time to change the eligibility date or allow multiple HARPs.

Might other aspects of the program be changed in a sweeping HARP 3.0? FHFA won't say. Rather, Murphy explains, the agency is "focused on borrower awareness to encourage eligible homeowners to take action."

Nearly 100,000 HARP refinances were completed in February 2013, bringing the total to 2.3 million since the program's inception in April 2009, according to FHFA.

HARP restrictions

Regardless of when HARP expires, many homeowners will still be unable to refinance through the program chiefly for these reasons:
  • Bad credit. Some borrowers can't qualify due to impaired credit or too many late payments on their existing mortgage.

    "The people who have these challenges have them for a reason," Chivas says. "There's nothing we can do to help them other than say, 'Pay your bills on time.'"
  • Inadequate equity. HARP has no maximum loan-to-value (LTV) ratio for borrowers who obtain a new fixed-rate mortgage and a maximum LTV ratio of 105 percent for borrowers who get a new adjustable-rate mortgage. But lenders typically impose their own guidelines, called "overlays," which may include stricter LTV caps.

    Chivas says some lenders have loosened their LTV guidelines, raising maximums from, say, 105 percent to 135 percent or 125 percent to 150 percent.

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