Earlier this year, Fannie Mae (FNMA) and Freddie Mac announced that they would offer new refinancing opportunities for homeowners who are underwater on conventional mortgage programs guaranteed by them.
We are pleased to announce that Fannie Mae and Freddie Mac have now (effective March 18) updated their Automated Underwriting Systems to handle the new HARP 2.0 initiatives.This process helps lenders to ensure that the borrower’s loan is eligible for refinance and determines any reduced documentation.
The most common reduction in documentation that we are anticipating is an appraisal waiver. If eligible, the lender would not require an appraisal, reducing the associated time, cost and extra underwriting.
Since the program is aimed at helping underwater borrowers, we anticipate the appraisal waiver on many of these loans. Even in cases where an appraisal is required, the loan-to-value ratio will not be an issue.
So what else should you know about these refinance loans?
- If you currently have a second mortgage (either taken at time of purchase or later), the lender must send a request to the second lien holder and ask them to re-subordinate the second mortgage. The choice to do this will be up to the second lien holder.
- If you had mortgage insurance (required if initially you put less than 20 percent down), you will need to have the existing mortgage insurance premium transferred to the new loan. This is a process the lender will undertake, reaching out to the mortgage insurance company. This is another area outside of the lender’s control and may take some additional time.
- If you never had mortgage insurance, you will not be required to add mortgage insurance to these loans, regardless of loan-to-value ratio. .
As noted in a previous blog, HARP 2.0 loans must meet certain criteria and must be owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac.
Allen Tate Mortgage is helping refinance borrowers determine if these new offerings are an option for them. With continued low interest rates, program like HARP 2.0 are designed to help numerous “underwater” borrowers refinance who could not previous do so and are expected to generate much interest.
By Lisa Green (Vice President of Loan Origination)