HARP 2 : Refinancing Underwater Mortgages With PMI Or LPMI
The Home Affordable Refinance Program (HARP) has evolved since it first launched in 2009. The newest version of HARP -- HARP 2 -- simplifies the process of refinancing underwater loans with PMI.
Yet, as many HARP applicants have discovered, just because the underwater mortgage program allows for refinancing loans with PMI, that doesn't mean that banks will do it.
If you've been turned down for HARP because of private mortgage insurance, don't give up. You still have options.
HARP 2 : About The Making Home Affordable Program
In 2009, the government launched a stimulus program known as Making Home Affordable. Making Home Affordable was designed, among other things, to help give homeowners with little or no home equity access to low mortgage rates.
One component of Making Home Affordable was dubbed HARP -- the Home Affordable Refinance Program. HARP was intended to reach 7 million households nationwide, lowering their monthly mortgages and boosting consumer spending and savings rates.
Homeowners in states hardest hit by the housing market pullback -- notably California, Arizona, Nevada and Florida -- were expected to get the most benefit from HARP. Restrictive mortgage underwriting standards limited the program's reach, however, and between 2009-2011, HARP's initial program reached fewer than one million U.S. households.
This was a compelling force behind the government's decision to overhaul the Home Affordable Refinance Program in late-2011. The new HARP iteration was dubbed HARP 2.0, and it reached more than one million households in 2012 alone.
With HARP 2, program guidelines have been relaxed :
- You can use HARP to refinance with any participating lender -- not just your current bank
- You can remove co-borrowers from a mortgage if they no longer share the home
- You can use unlimited loan-to-value because appraisals are typically unnecessary
But perhaps the biggest change in the government's program is with respect to private mortgage insurance.
In HARP's first iteration, homeowners whose existing mortgages carried PMI -- either borrower-paid mortgage insurance or lender-paid mortgage insurance -- faced a bevy of underwriting obstacles, all the way to closing. Few loans with PMI closed under HARP 1 -- mostly because of "the hassle".
With HARP 2, those PMI obstacles have been lifted. You can now HARP-refinance with PMI.
Turned Down Because Of PMI Or LPMI?
Unfortunately, not all banks are honoring the PMI provisions of HARP 2.0.
If you've applied for the Home Affordable Refinance Program and have been turned down by your bank because your existing loan has PMI, the general reason is because HARP loans that replace existing loans with PMI must carry the same amount of loans with "coverage" as the original one.
This process of replacing coverage can take an hour, or, in some cases, such as where LPMI applies, it can take up to three weeks or longer.
Because HARP loans with PMI require extra work, and its unclear how long that work can take, many lenders choose to avoid such loans with PMI altogether. It doesn't mean your loan can't get done -- it means your loan can't get done at the bank at which you're applying.
When your HARP mortgage application is denied because of PMI, try a different lender.
Re-Apply For HARP 2.0 With PMI
The good news for Home Affordable Refinance Program mortgage applicants is there are plenty of banks that do HARP loans with PMI. The hard part, though, is finding them. They're not banks you'll find in every corner of town and sitting in the strip malls.
The Home Affordable Refinance Program remains a specialty product and there are plenty of lenders writing good loans with it. If you've been turned down because of PMI or for any other reason, don't give up. Find a new channel to find a lender. Get started with a rate quote.