On November 15, 2011, Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) announced changes to their mortgage refinance programs to reflect enhancements to the Home Affordable Refinance Program (HARP) that give more “under water” borrowers an opportunity to refinance their loans. The revised program, known as HARP 2, continues to be available only for borrowers with loans purchased by Fannie Mae or Freddie Mac on or before May 31, 2009. In addition to reducing risk for lenders who refinance eligible mortgage loans, changes to the HARP program include:
• Eliminating the 125% loan-to-value (LTV) ratio cap for fixed-rate mortgages with terms up to 30 years.
• Reducing risk-based fees for borrowers and eliminating these fees altogether if they refinance into a mortgage loan with a term of 20 years or less.
• Requiring that borrowers receive a benefit from refinancing in the form of either a reduced monthly mortgage payment (principal and interest) or a more stable product, such as a fixed-rate mortgage instead of an adjustable rate mortgage.
• Extending the program expiration date to December 31, 2013.
The changes will become effective for mortgage loans with application dates on or after December 1, 2011. To be eligible, borrowers may not have had any mortgage delinquency in the last six months nor had more than one 30-day or more delinquency in the last 12 months (months 7-12). As under the original HARP program, the current LTV ratio must exceed 80% for the borrower to qualify. Borrowers with a GSE loan may contact their existing lender or any other mortgage lender that agrees to handle a HARP 2 refinancing. Servicers will implement the program over the coming months.