In a move some borrowers and
originators might consider "too little, too late" both Fannie Mae and Freddie
Mac announced today they are expanding the eligibility dates for the Home
Affordability Refinance Program (HARP). While tremendously useful to the small amount of borrowers who benefit from the change, it's not quite as magnanimous as it might sound.
Previously, loans had to have been
delivered to the agencies by 5/31/2009 to be eligible for HARP, which led to
widespread confusion as lenders and borrowers had difficulty determining actual
loan delivery dates without researching agency records. In general, loans
closed by April 2009 were delivered to Fannie/Freddie by end of May, so were
previously eligible; those closing in May 2009, however, may have missed the
initial delivery date requirement.
With the changes announced today, the eligibility date will now be based on the NOTE date, thus opening the window of HARP eligibility to all those borrowers who may have closed their loans before the May 31st cutoff, but whose loans weren't acquired by the GSEs until after the cutoff.
Fannie Mae (per Selling Guide
SEL-2013-08) will update their Desktop Underwriter (DU) system on Nov 16 to reflect
the new eligibility dates; Freddie Mac will update its Loan Prospector (LP) underwriting system to reflect the changes on Oct 27. Lenders are required to have DU/LP approvals
for HARP loans, so may be hesitant to start them until the underwriting
guidelines are revised.
Best execution rates in May 2009
rose from 4.69 to 4.88%, versus the current 4.25% rate for ideal
borrowers. A borrower with a $200,000 loan could anticipate saving
approximately $80/mn, an amount that could increase if rates continue their
downward trend of the last month amid reduced expectations of Fed tapering.
The chief advantages of HARP loans
include their reduced equity requirements, a feature that enables many equity
challenged borrowers to reduce their rates without incurring additional
mortgage insurance costs, and, in some cases, relaxed income documentation as
Home owners who closed their
existing conforming loans in May 2009, and who were previously told they were
not HARP eligible may want to contact a lender to discuss their HARP
eligibility. Both lenders and borrowers might be excused if they wonder
why Fannie and Freddie waited until the HARP program was 3 years old to make
this logical change.