HARP 3 : What’s the #MyRefi Program And Who May Qualify (Including Mortgage Rates)
Talk for a HARP 3 program is growing louder.
The rumored program was born January 2012, conceptually introduced in the president's State of the Union address. Since that date, the notion that "every responsible homeowner" should be able to refinance to today's low rates has gained traction.
More recently, the White House called it "a no-brainer". In some form, it's likely that HARP 3.0 will pass. The government is calling it "A Better Bargain For U.S. Homeowners". It's also been called #MyRefi.
In Brief : The HARP Refinance Program
Home Affordable Refinance Program (HARP) is a government-backed refinance program. It was launched in 2009 as a means to stimulate the economy. At the time, mortgage rates were falling but few homeowners were able to refinance because they had lost too much equity in their respective homes.
HARP waived certain loan-to-value requirements, and close to 1 million U.S. households took advantage.
Then, in 2012, HARP was expanded.
Dubbed Harp 2.0, all loan-to-value requirements were suddenly waived, as were proof of income requirements; proof of asset requirements; minimum credit score requirements; and, as a host of other qualifiers.
In many cases, HARP 2.0 won't even ask for a home appraisal.
The retooled HARP 2.0 was specifically designed to remove refinancing hurdles. Consider the program's three basic requirements :
- To use HARP, you must have less than 20% equity in your home
- To use HARP, you must have paid your loan on-time for the last 6 months
- To use HARP, your loan must have a note date of no later than May 31, 2009
There's a fourth requirement, too -- HARP requires that your mortgage be backed by either Fannie Mae or Freddie Mac. This one stymies the millions of underwater U.S. homeowners with privately-held mortgages.
With HARP 3, that requirement may be no longer. Soon, even homeowners with existing Alt-A, jumbo and sub-prime loans could find themselves HARP-eligible.
HARP 3 : Help For Non-Fannie, Non-Freddie Mortgages?
HARP 3.0 is not yet passed but it makes for some interesting talk. HARP 3.0 would likely help homeowners whose mortgages are specifically not backed by Fannie Mae or Freddie Mac.
This is a big deal because, although the Fannie Mae-Freddie Mac-FHA triumvirate controls more than 90% of today's new mortgage originations, that wasn't the case from 2001-2007. Last decade, non-GSE lending was a major part of the U.S. housing market.
For example, Federal Reserve data shows that Alt-A mortgages accounted for 27.5% of mortgage originations in 2005. Today, by current rules, each of these homeowners is locked out from the Home Affordable Refinance Program.
HARP 3 would allow these Alt-A customers to (finally!) refinance their home loans.
In addition, there were lots of "A Paper" mortgages that went to sub-prime investors last decade because, at the time, the sub-prime market offered lower mortgage rates than the conforming market did. Ludicrous, but true.
Conforming, 30-year fixed rate mortgage rates were 5.50 percent in mid-2005. Sub-prime 30-year fixed rates, by contrast, were a quarter-point lower at 5.25%. Which would you have taken?
Homeowners with sub-prime mortgages may become HARP-eligible, too.
And, lastly, HARP 3.0 could help homeowners with jumbo mortgages that, in today's market, would not be jumbo mortgages.
Last decade, before conforming loan limits were raised to $625,500 in "high-cost areas" throughout California, Virginia, Maryland, and New York, for example, homeowners who bought or refinanced were relegated to non-conforming loan products -- loans that met typical underwriting guidelines but that were too big for Fannie Mae or Freddie Mac to purchase.
After home values fell, although their mortgages met Fannie Mae loan standards; and, although their mortgages were within Fannie Mae loan limits, these homeowners were unable to use HARP 2.0 because their mortgages weren't backed by the government. They were held by a bank, such as Wells Fargo, CitiMortgage, Chase, or Bank of America.
With HARP 3, these "high-cost", jumbo homeowners would get the chance to refinance.
HARP 3 Candidates
We don't know when HARP 3.0 will be made official (if ever). Nor do we know which homeowners will qualify for HARP 3 when it's passed. However, based on HARP history and talk from Washington, D.C., we can make a few good guesses.
Some of the "borrower types" HARP 3.0 is expected to target include :
- A self-employed person who used stated income loan for the original mortgage, and can verify their current income via federal tax returns
- A "prime" borrower who used a sub-prime mortgage because mortgage rates were lower and/or fees were less as compared to a conforming one
- A jumbo mortgage homeowner who lives in a "high-cost area" whose original mortgage was for between $417,000 and $625,500
- A wage earner who used a stated income and/or stated asset mortgage for convenience
- Sub-prime borrower who has paid mortgage as agreed and can verify income and assets
- An Alt-A borrower whose FICOs were low at date of origination, but have since improved
There are literally millions of U.S. homeowners who would meet HARP 3.0 eligibility standards, which would open today's low mortgage rates to all of them.
Compare HARP Mortgage Rates
HARP 3 is an interesting product. It would be the extension of HARP 2.0 for homeowners whose mortgages are private-market money -- either because non-government loans were cheaper, or because no suitable government product existed.
So, whether you're a HARP 2.0 candidate, HARP 3.0 candidate, or just want to see today's mortgage rates, stop a take a quote. HARP mortgage rates are comparable to non-HARP rates, and closing fees are often lower.
Click here to get HARP mortgage rates.