(HARP) Home Affordable Refinance Program HARP 2.0




Why are you making these changes to HARP now?

For some time, FHFA, Fannie Mae and Freddie Mac (the Enterprises), lenders, servicers and
private mortgage insurers (MI’s) have been engaged in a coordinated, industry-wide effort to
find ways to increase the number of homeowners who are able to refinance through HARP. With
mortgage interest rates at historic lows, we believe it is an opportune time to put the industry’s
experience with the program to work so more eligible borrowers can refinance Fannie Mae or
Freddie Mac-owned mortgages. Importantly, such refinances bring benefits to borrowers, to
housing markets, and to the Enterprises and taxpayers.

Which borrowers may be eligible for an enhanced HARP? 

In general, borrowers must meet the following criteria:
 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.

Given the eligibility criteria, can you estimate how many borrowers may refinance 
through HARP as a result of these changes? 

For many reasons it is very difficult to project the number of mortgages that may be refinanced
under the enhancements to HARP, including the future path of interest rates, borrower
willingness to undertake a refinance transaction and the number of lenders and servicers who
choose to offer the program.   Given current market interest rates, our best estimate is that by
the end of 2013 HARP refinances may roughly double or more from their current amount but
such forward-looking projections are inherently uncertain.  The more important point is that
material changes have been made to enhance access to the program but HARP, before and with
these changes, is not intended to serve all borrowers, or even all underwater borrowers.  It is
targeted just at borrowers with loans owned or guaranteed by the Enterprises that meet the
eligibility requirements set forth above.

What about borrowers whose loans are not owned or guaranteed by Freddie Mac 
or Fannie Mae? 

Neither FHFA nor the Enterprises have the legal authority to extend HARP to borrowers whose
mortgages are not owned or guaranteed by Fannie Mae or Freddie Mac.

What do borrowers need to do to take advantage of HARP?  

The first step is for the borrower to learn if his or her mortgage is owned or guaranteed by
Freddie Mac or Fannie Mae by visiting the Enterprises’ websites. Each Enterprise has a web tool
for that purpose.   If the mortgage is owned or guaranteed by Fannie Mae or Freddie Mac, the
borrower should contact his or her existing lender or any other mortgage lender offering HARP
refinances.

Are offers from companies promising to help borrowers get HARP loans 
legitimate?  

Borrowers do not need to use third party companies that advertise themselves as "mortgage
experts" or "foreclosure specialists" to apply for a HARP loan. Before calling such companies
borrowers should talk first with their mortgage lender.

Is there a maximum loan-to-value (LTV) ratio for HARP? 

There is no longer a maximum LTV limit for borrower eligibility.  If the borrower refinances
under HARP and their new loan is a fixed rate mortgage, there is no maximum LTV.  If the
borrower refinances under HARP and their new loan is an adjustable rate mortgage, their LTV
may not be above 105%.

Is HARP the only refinance program available to borrowers? 

Our task the past few months has been to evaluate an existing program – HARP – to assess if it
could be enhanced to better reach its target population of borrowers whose mortgage balances
exceed the values of their homes.  HARP is only one of several refinancing options available to
homeowners and is unique in that it is the only refinance program that enables borrowers with
little to no equity in their homes to take advantage of low interest rates and other refinancing
benefits. Indeed, Fannie Mae and Freddie Mac have helped approximately nine million families
refinance into a lower cost or more sustainable mortgage product since April 2009 and we will
continue to work to provide those opportunities in a responsible way.

Are mortgages on condominiums eligible for refinance under HARP?

Condominiums are already eligible under HARP and, under the enhanced program,
condominiums that originally met Enterprise requirements remain eligible.

What are the circumstances under which appraisals are not required? 

We are further streamlining the Enterprises’ existing use of AVM (automated valuation model)
estimates of properties.  Where there is a reliable AVM estimate of value provided by the
Enterprises, a new appraisal will not be needed. Where there is not a reliable AVM value, a new
appraisal will be required.
When will these enhancements become available? 

Timing will vary by mortgage lender. The Enterprises will be sending operational instructions to
lenders by November 15th.  Some lenders may be able to accommodate mortgage applications
2under some of the enhancements by December 1 while it could take other lenders additional
time to incorporate the expanded program into their systems.  In addition, some of the
enhancements such as delivery of loans with LTV greater than 125 should be operational during
the first quarter of 2012.
Are you concerned that eliminating seller and servicer representations and 
warrants on HARP loans will force the Enterprises to take on additional risk?    

We anticipate that the package of improvements being made to HARP will reduce the
Enterprises credit risk, bring greater stability to mortgage markets and reduce foreclosure risks
– each of which is an important statutory mandate for FHFA.
Nearly all HARP-eligible borrowers have been paying their mortgages for more than three years,
and most of those for four or more years.  These are seasoned loans made to borrowers who
have demonstrated a capacity and commitment to make good on their mortgage obligation
through a period of severe economic stress and house price declines.
Reps and warrants protect the Enterprises from losses on defective loans; typically, such defects
show up in the first few years of a mortgage and so the value of the reps and warrants decline
over time.  By refinancing into a lower interest rate and/or shorter term mortgage, these
borrowers are recommitting to their mortgage and strengthening their household balance sheet,
thereby reducing the credit risk they already pose to the Enterprises.  Therefore, FHFA has
concluded that eliminating the reps and warrants that may have discouraged industry
participants from taking greater advantage of HARP to-date will be good for borrowers, housing
markets, and the Enterprises and taxpayers.

Why are you encouraging borrowers to shorten the terms of their mortgage? 

Borrowers who owe more on their mortgages than their homes are worth may be locked into
their homes for years and have fewer financial options until they pay down the loan balance.  A
shorter term mortgage enables such borrowers to pay down the amount they owe much faster
than a traditional 30-year mortgage.  Furthermore, interest rates on shorter term mortgages
usually are less than on thirty-year mortgages.  The lower interest rate may provide  borrowers
the opportunity to shorten the term of their mortgages without much change in their monthly
payments, and perhaps even a reduction in that payment.  Such an outcome may strengthen the
borrower’s financial condition and lower the credit risk for the Enterprise that owns or
guarantees the loan.  A few examples illustrate how this works:
 Assume a homeowner currently has a mortgage on which he or she owes $200,000 and
has an interest rate of 6.5 percent – a monthly payment of $1264.  If the house is worth
$160,000, the homeowner has a current loan-to-value (LTV) ratio of 125 percent.
 If this borrower refinanced into a 30-year fixed-rate mortgage with an interest rate of 4.5
percent, the monthly payment would decline to $1013.  But, by refinancing into a 30-
year loan, the borrower’s loan balance will not reach $160,000 for ten full years.
 If the borrower chose a 20-year loan term at a rate of 4.25 percent (mortgage rates tend
to be less for shorter term mortgages), the monthly payment would be $1238 ($26 less
than the borrower currently pays) and the borrower’s loan balance would reach
$160,000 in five-and-one-half years.
3 If this same borrower refinanced into a 15 year mortgage, assuming an interest rate of
3.75 percent, the monthly payment would be $1454 ($190 more than the current
payment), but the loan balance would be below $160,000 in a bit more than three-andone-half years.
These examples are purely illustrative and are not meant to represent interest rates borrowers
should expect to pay.  They do show that some HARP-eligible borrowers, depending on their
circumstances and priorities, may benefit from a shorter term mortgage.  Since shorter term
mortgages reduce credit risk to the Enterprises because of the faster repayment of principal,
there will be no added fee for borrowers that choose shorter terms











About Servicers

1. Who is my “servicer?" Is my servicer the same as my lender or investor?



Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. It is possible that the owner of your mortgage also services it, however many loans are owned by groups of investors and these investors hire loan servicers to interact with homeowners on their behalf. Many lenders also have the loan servicers handle all contact with homeowners.



Traditionally, banks used money deposited in customers' savings accounts to make loans. They held the loans, earning the interest as homeowners repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing homeowners repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money for banks to lend.



Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers.



If you have questions about your loan, or you are behind on your payments, you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.



2. Is my servicer participating in MHA?

All servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate. Additional servicers are strongly encouraged to participate. (See “How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?”)



3. What should I do if my servicer tells me that the investor is not participating in the Making Home Affordable Program?

Keep in mind that all servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate with respect to those loans but you are not obligated to your current servicer/lender. You can choose another servicer/lender. (See “How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?”)



Home Affordable Refinance Program (HARP)

4. I'm current on my mortgage. Will a refinance under the Home Affordable Refinance Program (HARP) help me?

Eligible homeowners who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.



5. How do I know if I am eligible for a refinance under HARP?

You may be eligible if:





The mortgage MUST be owned or guaranteed by Fannie Mae or Freddie Mac (See “How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?").

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.

You have a reasonable ability to pay the new mortgage payments.

The refinance improves the long term affordability or stability of your loan. (See “Will refinancing lower my payments? How might HARP benefit me?”)

6. Will refinancing lower my payments? How might HARP benefit me?

The objective of a refinance under HARP is to provide creditworthy homeowners who have shown a commitment to paying their mortgage the opportunity to get into a new mortgage with better terms.



Homeowners whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Homeowners who are paying interest only, who have a low introductory rate that will increase in the future, or who face a balloon payment may not see their current payment go down if they refinance to a fixed rate and payment. These homeowners, however, could save a great deal of money by reducing the amount of interest you pay over the life of the loan.



Refinancing into a more stable fixed-rate loan product and avoiding future mortgage payment increases would likely improve your ability to sustain your mortgage payments over the long-term. When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.



7. Will a refinance under HARP reduce the amount that I owe on my loan?

No. The objective of a refinance under HARP is to help homeowners get into more stable or more affordable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe. (See “How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?”)



8. How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?

When you submit a loan application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement" that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.



9. How do I know if my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?

Both Fannie Mae and Freddie Mac have established toll-free telephone numbers and web submission processes to make this data available. Homeowners can enter information to determine if either agency owns or guaranteed the loan. This information is not a guarantee of eligibility for a refinance under HARP, as other qualifying criteria must also be met.



For Fannie Mae:

www.fanniemae.com/loanlookup



For Freddie Mac:

www.freddiemac.com/mymortgage



10. There is no longer a maximum LTV limit for borrower eligibility. If the borrower refinances under HARP and their new loan has a fixed rate mortgage, there is no maximum LTV. If the borrower refinances under HARP and their new loan is an adjustable rate mortgage, their LTV may not be over 105%.



11. I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?

As long as the amount due on the first lien mortgage is less than 125% of the value of the property, homeowners with more than one mortgage may be eligible for a refinance under HARP. Your eligibility will depend, in part, on two additional requirements:





The lender that has your junior lien mortgage must agree to remain in a junior lien position.

You must be able to demonstrate your ability to meet the new payment terms on the first lien mortgage.

12. What are the interest rate and other terms of a refinance under HARP?

The rate will be based on market rates in effect at the time of the refinance and the homeowner will be subject to any associated points and fees quoted by your lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.



13. Can I get cash out to pay other debts?

No. The Home Affordable Refinance will not return cash to the borrower for the purpose of paying other debts.



14. How do I apply for a refinance under HARP?

It's as simple as clicking on the Button. A HARP specialist will analyze the data, direct or guide you to all the benefits HARP has to offer. HARPPROGRAM.ORG has moments of higher than average volume. Please be patient and you will be helped as soon as possible. It will also speed up the process if you have the necessary documents ready for the HARP specialist. Generally, you will need the following:





Information about the monthly gross (before tax) income of all the homeowners on your loan, including recent pay stubs if you receive them, or documentation of income you receive from other sources





Your most recent income tax return

Information about any junior lien mortgage on the house

Account balances and minimum monthly payments due on all of your credit cards

Account balances and monthly payments on all your other debts such as student loans and car loans

15. I am delinquent on my mortgage. Will I qualify for a refinance under HARP?

No. Homeowners who are currently delinquent or have been more than 30 days overdue during the past 12 months generally will not qualify. Contact your servicer to see if a modification under the Home Affordable Modification Program is an option for you.



16. Will I need mortgage insurance?

If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for a refinance under HARP. If your existing loan does not have private mortgage insurance, it will not be required as part of a refinance under HARP.



17. How long will refinances under HARP be available?

The program expires on December 31, 2013. Your refinance under HARP must have a mortgage note date on or before that date.





18. Are mortgages on condominiums eligible for refinance under HARP?

Condominiums are already eligible under HARP and, under the enhanced program, condominiums that originally met Fannie Mae/Freddie Mac requirements remain eligible.





19. What are the circumstances under which appraisals are not required?

We are further streamlining Fannie Mae/Freddie Mac's existing use of AVM (automated valuation model) estimates of properties. Where there is a reliable AVM estimate of value provided by Fannie Mae/Freddie Mac, a new appraisal will not be needed. Where there is not a reliable AVM value, a new appraisal will be required.





20. When will these enhancements become available?

Timing will vary by mortgage lender. Fannie Mae/Freddie Mac will be sending operational instructions to lenders by November 15th, 2011. Some lenders may be able to accommodate mortgage applications under some of the enhancements by December 1 while it could take other lenders additional time to incorporate the expanded program into their systems. In addition, some of the enhancements such as delivery of loans with LTV greater than 125 should be operational during the first quarter of 2012.





21. Why are you encouraging borrowers to shorten the terms of their mortgage?

Borrowers who owe more on their mortgages than their homes are worth may be locked into their homes for years and have fewer financial options until they pay down the loan balance. A shorter term mortgage enables such borrowers to pay down the amount they owe much faster than a traditional 30-year mortgage. Furthermore, interest rates on shorter term mortgages usually are less than on thirty-year mortgages. The lower interest rate may provide borrowers the opportunity to shorten the term of their mortgages without much change in their monthly payments, and perhaps even a reduction in that payment. Such an outcome may strengthen the borrower’s financial condition and lower the credit risk for the servicer/lender that owns or guarantees the loan. A few examples illustrate how this works:





Assume a homeowner currently has a mortgage on which he or she owes $200,000 and has an interest rate of 6.5 percent – a monthly payment of $1264. If the house is worth $160,000, the homeowner has a current loan-to-value (LTV) ratio of 125 percent.

If this borrower refinanced into a 30-year fixed-rate mortgage with an interest rate of 4.5 percent, the monthly payment would decline to $1013. But, by refinancing into a 30-year loan, the borrower’s loan balance will not reach $160,000 for ten full years.

If the borrower chose a 20-year loan term at a rate of 4.25 percent (mortgage rates tend to be less for shorter term mortgages), the monthly payment would be $1238 ($26 less than the borrower currently pays) and the borrower’s loan balance would reach $160,000 in five-and-one-half years.

If this same borrower refinanced into a 15 year mortgage, assuming an interest rate of 3.75 percent, the monthly payment would be $1454 ($190 more than the current payment), but the loan balance would be below $160,000 in a bit more than three-and-one-half years.

These examples are purely illustrative and are not meant to represent interest rates borrowers should expect to pay. They do show that some HARP-eligible borrowers, depending on their circumstances and priorities, may benefit from a shorter term mortgage. Since shorter term mortgages reduce credit risk to Fannie Mae/Freddie Mac because of the faster repayment of principal, there will be no added fee for borrowers that choose shorter terms.



Joel Lobb
Senior  Loan Officer
(NMLS#57916)

American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223

 phone: (502) 905-3708
 Fax:     (502) 327-9119

 Company ID #1364 | MB73346