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HARP 2: Will It Really Help…Or Is It More Hype?

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The mortgage industry is buzzing about HARP 2, the revamped federal Home Affordable Refinance Program. Some are predicting it will trigger the biggest refi boom of the decade. But will it really help homeowners whose loans are deeply underwater refinance into low-rate loans? Or is this more hype about a program that will help far fewer homeowners than promised? Guidelines released recently by one of the nation’s largest mortgage lenders raises questions about where the program is headed.

The expanded Home Affordable Refinance Program (HARP 2) is designed to make it easier for homeowners who owe much more than their homes are worth to refinance their loans into low-rate, fixed-rate loans. Under the original HARP, a first mortgage could not be refinanced if the new loan amount would exceed 125% of the home’s value (125% LTV). HARP 2 does away with that cap, with the goal of allowing homeowners who are seriously upside down on their loans to refinance.

That means this program potentially could help a lot of borrowers. According to CoreLogic research:

Of the 11.1 million upside-down borrowers, there were 6.7 million first liens without home equity loans and an average mortgage balance of $219,000 at the end of 2011. This group was underwater by an average of $51,000 or an LTV ratio of 130 percent. The remaining 4.4 million upside-down borrowers had both first and second liens and were upside down by an average of average of $84,000 or a combined LTV of 138 percent…The removal of the 125 percent LTV cap via HARP 2.0 means that over 22 million borrowers are currently eligible for HARP 2.0 when just considering LTV alone.

There are some very basic requirements all loans must meet. Only homeowners whose loans were sold to Fannie Mae or Freddie Mac before June 1, 2009 are eligible. And borrowers must be current on their mortgage, with no more than one 30-day late payment in the last year, and none in the most recent six months. Beyond that, individual lenders are free to add their own requirements (called “overlays”) to these loans. That’s where trouble may be brewing.

Wells Fargo, one of the nation’s largest mortgage servicers and a major participant in the original HARP, has released its guidelines for HARP 2 loans, and they are more restrictive than some in the industry were expecting. Wells Fargo will not refinance mortgages for homeowners whose loans they do not currently service if the amount of the primary mortgage is greater than 105% of the home’s value, and the combined loan-to-value (the first mortgage plus any second mortgage or home equity line of credit) is greater than 110%.

“Those guidelines are worse than the original HARP,” says Joe Kelly, founder of YouCanRefi.com, referring to the caps for non-Wells Fargo customers. His firm has specialized in HARP loans since the original program launched and, like many mortgage firms, and he says he has high hopes for the HARP 2 program.

This news is significant because of the major role that Wells Fargo plays in the mortgage industry. Wells Fargo originated 31% of all residential mortgages in the fourth quarter of 2011, explains Guy Cecala, publisher of Inside Mortgage Finance. He adds that they are also “one of the top refinance mortgage producers in the country. Last year they accounted for 24.4% of all refinance mortgages made. That, of course, included a lot more loans than just the ones they service themselves.”

That also means that many mortgage firms may have been counting on being able to help their clients refinance high LTV loans by putting them into HARP 2 loans through Wells Fargo. (There are numerous lenders across the country who broker for, or sell loans to Wells Fargo.) But those hopes may be dashed by this latest news. On the other hand, homeowners whose loans are currently serviced by Wells Fargo may have reason to cheer. The guidelines for refinancing their loans are very generous, with few limits on LTVs or minimum credit scores.

“It basically means I can help someone whose loan is with Wells and has, say, a 180% LTV on his condo in Florida with a 600 credit score,” says Kelly.

Will HARP 2 Live Up to the Hype?

Other lenders who have released their guidelines are focusing on offering the program to their own customers. Last week, a Bank of America spokesperson was quoted in a Bloomberg article as saying the bank “is fully committed to providing our customers with the benefits of refinancing through our continued implementation of HARP 2.” (Italics added.) Mark Rodgers, director of public affairs for Citi declined to provide specifics, but said that, “Although the program is relatively new, we are seeing success helping borrowers to lower their mortgage payments.”

So it’s not all bad news. After all, even if the major servicers extend HARP 2 just to their own customers, the program could still help a significant number of homeowners. According to Cecala, Wells Fargo services 17.7% of existing residential mortgage loans, followed by Bank of America (17.2%), Chase (11.4%), Citi (5.2%) and Ally Financial (3.7%). Together, those top 5 lenders service just over half of current residential mortgages. But what about borrowers whose servicers decide not to participate in HARP 2, or who set significant restrictions on the loans they will refinance? A lender may agree to participate in HARP 2, for example, but then set low caps on loan-to-value ratios, the way Wells Fargo has for non-customers?

“One of the things we saw under HARP 1 most of the refinance activity was at 105% (LTV) and that didn’t help that much,” observes Cecala. “What’s going to make it better under HARP 2?” Another problem: borrowers may be stuck with their current servicers, regardless of how good (or not so good) they are at closing their loans. One of the goals of HARP 2 is to encourage competition, explains Cecala, and if lenders limit the program to their existing customers, that won’t happen.

“Somewhere in the neighborhood of 90% of borrowers refinance with someone (other than their current mortgage lender). You go with whomever is offering the best loan and there is some competition, but that’s not the case with the HARP program,” he says.

Still, Cecala remains “cautiously optimistic” about the program. So does Kelly, who points out that some lenders have yet to release guidelines. Indeed, as I was finalizing this story, Kelly told me he received a flyer from a lender promoting HARP 2 loans with no caps on the loan-to-value ratio. “Not everyone is following (Well Fargo’s) lead,” he notes.

Image: WoodleyWonderWorks, via Flickr

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  • http://housingfear.blogspot.com housingfear

    Wells fargo is criminal.

    They service my mortgage, fannie mae loan, 770 credit score. They told me they can’t do more then 115 percent loan to value with harp 2.0. I waited since ocotober to be rejected and now interest rates have skyrocketed. Its criminal that they can totally ignore the governments guidlelines like this.

    • Michele

      Check again with Wells again. My understanding was that they will go up to 150% for their own clients and 105% for other servicers. I just closed on a Harp 2.0 for an investment property on April 4,2012. Wells is my servicers, FreddieMac owned, LTV just under 91%, FICO score is 799 and had a change of original occupancy. Wells covered all the cost except for $485. I went from 5.625 down to 4.625. My payments went from $2400 to $2030.
      I talk with several different Wells mortgage consultants before choosing one.( not all of them have the right information and knowledge ) I also went on the FreddieMac website and printed a copy of the new guidelines and read them so that I was prepared before applying.
      Wells told me that FreddieMac required an impound acct. if the LTV was 91% and above. I told her that I didn’t want an impound because it would permanently lock me into a higher payment and cost me more at closing (6 months prop tax and 2 months insurance prepaid).
      I then called FreddieMac to verify what Wells told me. FreddieMac said they ARE NOT requiring impound accts and that Wells was adding that in as one of their own conditions. Needless to say, I did not have to get the impound acct. Even though I was at 91% LTV, I just coughed up $500 extra to bring my loan down under the 91%.
      My advise to you is to get a copy of the FannieMae guidelines for the harp 2.0 so that you will understand what you can or cannot qualify for. And then if you have any questions, call FannieMae. The person I spoke with at FreddieMac was very nice and helpful.

      • Gerri Detweiler

        Good advice Michele – thanks for sharing your experience.

      • Dharmesh M.


        Can you recommend any Wells Agent in particular (if you don’t mind) as my situation is also same like you. I have the Investment property and my rate is 5.625% and I want to take benefit of this lower rate to save some in my monthly payment. My current loan is serviced through Metlife. When I called one of the Wells fargo Agent, he said, that they do HARP 2 for Fannie M. loan only and also it has to be only Wells Fargo serviced loan. I really don’t understand this. Also my current refinance broker is facing some issue with getting Approval on Freddie Mac loan not sure why.

  • http://housingfear.blogspot.com housingfear

    Also wanted to add I was quoted a 5 percent interest rate and a 380 appraisal fee from wells fargo. Yes that rate was last week with a 770 score. Mortgage guy calls back and says my mortgage is to risky if it comes in over 115 percent so he can’t approve it. I am about at 170 ltv amd I put 20 percent down in 2006.

    • Michele

      I was told the interest rate is based on LTV, that there was pricing based on levels. I did call another bank just in case Wells wouldn’t let go about the impound acct. Try calling US Bank and see what they can offer you. They do loans for other servicers.

  • Chris

    I decided right from the beginning to leave Bank of America and try to refinance somewhere else. I went to my local credit union in the beginning of March, asked if they were going to be HARP 2.0 participants. They told me yes, so I applied right away so that when fannie Mae rolled out the underwriting I would be in the system. As of now things are rolling right along, the $300.OO appraisal fee was waved, and today the loan officer called me to ask me if I wanted to lock in at 4%, I explained I did not have the cash for the points, he said was not required. So I did. If all goes well we will close towards end of April, at 4%, DOWN FROM 7.650, At a savings of $577.00 per month. It is just a waiting game right now.

    • Gerri Detweiler

      Chris – please let us know what happens! Hoping for a success story. :)

    • Liz rangel

      Please tell me name of your credit union…I’m still trying to get my Freddie Mac loan refinanced…I’m at 190% ltv

  • Chad

    I live in Chicago. In February I went through the whole refinance stuff. Filled out an application, had an appraisal, which came in just above 125%, and then had to wait till the new HARP 2 came into effect. Now, I can’t get a refiniance because none of the banks are refinancing condos, only homes. I have an 800+ credit, and have never been delinquent, but because its a condo, I’m apparently screwed.

    • Gerri Detweiler

      How frustrating! I know not all lenders have released their guidelines so perhaps there is stil hope. But if you aren’t getting anywhere, I’d encourage you to call your elected representatives in Washington and ask them for help – or at least complain. This is a government sponsored initiative and they need to hear how it’s really working (or not).

  • john reed

    Wells Fargo is not doing Harp 2 on loans they service as this article quotes. They told me they would only do loans that they originated. So if they later took over service of your loan because your company failed as many did, You will be stiffed by them. LTV 140% credit score 800, freddie loan, TURNED DOWN by then and they have my loan. Thanks a lot for this Harp2 smoke and mirrors political thing.!!!

  • Jeffrey Jones

    These HAMP and HARP programs are full of restrictive guidelines and/or guidelines that are allowed to be modified by lenders and servicers. The one important thing the gov’t forgot is to enforce the very guidelines they made for these type of loans. Most importantly, by allowing lenders/servicers to overlay or put a FICO credit requirement on these loans knocks millions of people out of qualifiying because a lot of people have a few dings on their credit from this down economy! So this is not really helping a vast section of hurting people.

  • Liz Reed

    I’ve been talking to Wells Fargo for 2 months and everyone I’ve spoke has a different answer. One says I can do the Harp loan and another says I can’t. Now I’ve got one saying Wells Fargo is not the investor om my loan but I have a letter from Wells Fargo say they are the investor in my loan. So now I’ve totally confused them.

  • Rala

    Reading these emails makes me shudder, as it becomes clear that the local banks can twist the Harp into anything they want – and then blame it all on Fannie Mae. Contrary to what Michele said, I was told that there were no levels of interest rates, they were all the same no matter your LTV – 3.88%. My local credit union offered me the Harp even though I have a condo (with .75 points added for that), but then “Fannie Mae” refused me (and this I do not believe) because my LTV surpassed 109%, and if my credit score had been higher I could have gone up a bit in LTV. My LTV 125%, credit score 620. Never delinquent on my home loan, car loan, credit card, just old student debt.

  • george

    more pimping and pandering to those who could not afford or qualify for a conventional
    mortgage!!! we did not recieve any bailout money we are not with Fannie Mae or Freddie
    Mac,so we do not have to refi you.I demanded to get some explantion? They said our
    official position is we are “Working on it” Period..Am under water current with good
    credit..I told them thats selective,and discrimantory.They hung up on me!! Its good
    election politics,Chicago Style folks..What a mess we are in..G

  • Laura Kocher

    I have been trying to refinance with BOA. They are telling me that my loan has investor restrictions but they cannot tell me what those are. How do I find out?

  • Terry

    No lender (whether new or current server of GMAC) will do a refi on my Fannie May loan. Due to some short-sales and foreclosures in my condo, my LTV is about 163%. My loan has LPMI. Fannie Mae backs the loan as of April 1, 2008, and it technically meets all the HARP 2.0 requirements. Credit score is between 750 and 800. However, Fannie Mae’s Desktop Underwriter comes back with the following, which indicates an appraisal is required: “Based on the address and other information available to Desktop Underwriter, this property is not eligible for a DU Refi Plus property fieldwork waiver.” All mortgage payments have been made on time. It is my primary residence and I have lived there for more than 4 years. Can someone help or am I screwed until HARP 3.0 and/or my property increases in value by at least 63%?

  • Matt

    Why is everyone on here trying to go through the large banks? The above article implicity states they are gouging on rates and capping LTV for certain loans/ borrowers. Go to a local Mortgage Banker/ Direct Lender and they will have many more options available, with less “overlays.” Good luck and stay away from the “Big Guys.” Or at the very least call more than one lender to get a competitive quote!

    • SR

      So agree about the big banks…we dealt with wells fargo for 3 months..and they just seemed to stall…….finally did close couple days ago…but it was ridicuously amount of paperwork…we basically had to send in everything just like we did years ago…verify employment, income..all that…which was not suppose to even matter in Harp 2.
      A friend of ours went thru Quicken loans and closed in less than 6 weeks…and they had a recent foreclosure on their old house and lower credit scores than us!..I truly don’t get it….guess we should have waited till more loan companies jumped on the band wagon to get into the program. I started as soon as it became available and no one wanted to do it.

      • Gerri Detweiler

        SR – Thanks for sharing your experience. I am not sure it would have helped to wait…it seems like it’s getting tougher not easier. But I am glad to hear you were finally able to close. How much did you save?

  • SR

    Saving about $383 a month…went from 6% to 4.62%….
    I actually had used a broker at the very beginning of the Harp 2 opening date of around March 17…figured he could get the best deal my comparing rates..etc..
    However, due to the underwriting program…our property was not able to just be one of the “fill in the blanks” loans…..it said we needed an appraisal…so no loans at that time wanted to bite the hook…
    So, we went back to WElls Fargo who were very easy to work with..and all seemed ready to close around May 10…only then the agent in the HARP office in ALabama just kept asking for more paper and more silly stuff…..they verified things that were supposedly not even necessary with the Harp loan…such as income, employment,
    a $400 appraisal. (which is ridiculous because we all know it was already underwater in the state of Arizona!)…anyway…the main problem was that the agent was “out” almost 10 days during the month of may and 2 days in June…and didn’t even leave an out going message on the voicemail that they would not be returning calls…that was the aggravating part….other than that…Wells Fargo was easy to work with and all involved were polite and friendly!

    • Gerri Detweiler

      Thanks again for all the details. I suppose in the end for $383/month it was worth it, but it does sound pretty aggravating.

  • http://www.cucompanies.com/ Dan

    I’ll add my own experience. I had a Countrywide (now BofA) loan from April 2008 at 6%. Started the HARP 2.0 process with them and was approved for a 20 year mortgage at 4.75% (would’ve gotten a rate under 4% if I were still living in the house).

    Took the information BofA gave me to my credit union (see website). They offered either 20 or 30 year at 4.5%. Trying to match the rate, BofA said I could buy points to get my rate to that level. No deal, especially with the additional information they kept asking for and higher fees–the credit union was much easier to deal with. I stuck with the credit union.

    Two weeks before closing (they moved it up a week since the application sailed through underwriting), they called me to let me know the rate had slipped to 4.375% and would I like to lock in. Sure! No fee to lock the rate, unlike $35 with BofA.

    Long story short, wound up saving over $300/month and no longer dealing with the evil empire BofA. Go credit unions!

    • Gerri Detweiler

      Congrats Dan! Just out of curiosity – is the loan underwater? By how much?

  • Sherri

    HARP is apparently one big joke on us. I received a card in the mail from ENG Lending that said because we had a Fannie Mae loan we were pre-qualified to be refinanced through HARP 2.0. We went through the refinance paperwork and were approved. At the last minute, ENG found out that our loan had been sold by Wells Fargo Bank several times without our knowledge and was no longer a Fannie Mae loan. We had tried to refinance about 3 years ago through Wells Fargo and they wanted us to come up with thousands of dollars because we were upside down. The government has done a poor job all around with helping upside-down homeowners and the bank bail-out was a huge mistake as the banks have no intention of helping a homeowner who wants to KEEP their home.

    • Gerri Detweiler

      Sherri –

      What a huge disappointment for you. I agree that it’s terribly frustrating for homeowners who want to keep their homes not to be able to get help. Foreclosures help no one except maybe those who buy homes cheaply. I hope you’ll share your experience with your elected officials in DC since they need to know how these programs are really working – or in your case not working.

  • Randy

    I have tried to do a modification with Wells Fargo for over two yrs.I bought my home in 1983 and had never missed or even had 1 late payment, with credit scores over 760. I used all of my IRA money keeping my mortgage current. After calling Wells Fargo over 100 times,and sending hundreds of documents, the only response was “default not imminent” Now I am two months behind on my mortgage and Wells Fargo says that I should have contacted them sooner?? I don’t think that W.F. ever had any intention of doing a modification.I really thought that being a good customer for over 30 yrs. would help me. Screw WELLS FARGO!



  • phnxrth

    It’s mostly hype. We’ve got great credit, never missed a payment and are under water about 10%. Got 5 different excuses and a 120 day runaround from one lender who seems the most promising, lies from another and a flat out no from a third.

    Think about it. These are bankers who are going to let you get into a cheaper loan? You’d best have a magic wand.

  • Nagem

    What if you don’t have a Fanni or Freddie loan??? I have a straight mortgage with WF? Why are we excluded?

    • Gerri Detweiler

      There is talk of an expanded program for loans not held by Fannie or Freddie. The reason only those two have been included is because they are government-sponsored enterprises.

  • K Walsh

    I just called Wells Fargo and was told that they don’t service other than their own loans. There is a huge list of companies supposedly using the HARP program, but having called several, I get replies stating that you have to be a customer. Please let me know how to find someone that actually WILL help someone needing the HARP program.

    • Gerri Detweiler

      Your perception that this program is largely available to homeowners whose loans are currently serviced by the largest servicers is correct. It is becoming harder and harder to find lenders who will refinance homeowners under HARP for those who are not their existing customers.

      There has been some talk about a new version of HARP that would be available to homeowners like you. But quite honestly, we’re unlikely to see anything major happen given the fact that we are now moving into election season. The best suggestion I can offer you is to contact your elected officials in Washington, complain, and ask for their help since this is a government initiative. Probably won’t get far but at least they need to know what’s going on.

  • jim

    Both harp and harp2 are a joke. My partner and I have looked into both with wells Fargo, bank of America and quicken loans. We are laypeople that are current on our loan but with my partner retiring and the house under water can really use some help to get our finances under control. Thought we were the people these programs were supposed to help. Eeveryone said, sorry, your debt to income ratio is too high. If we could get the help thru these programs, our ratio would be ok and we could cover our bills ok. I guess we will have to just go into foreclosure like others for the banks to offer any help.

    • http://www.Credit.com Gerri

      Jim – I hear you. You may also want to read my article, How to Give A Short Sale Your Best Shot, and listen to the interview with the attorney that is posted at the end. She shares what’s going on with loan modifications as well.

  • Nav Dombawela

    Can you please provide me with a contact info for Michele. I kave been fighting Wells Fargo for refinancing under HARP 2 program for a while and they keep rejecting me saying that the loan does not meet the parameters of the HARP program. I have an excellent credit rating and have never been late or missed a payment. I need some serious help

  • http://Harp2 Nima Russell

    I purchased my home in ’04, am under water, have good credit & income, never been late on payments. Wells Fargo is my lender and I’ve tried for 6 months to refi with them and keep getting different info. They said my loan “was modified a few years ago.” I haven’t done anything. A local credit union offered to refi me with a 3.875% loan but couldn’t follow through because we just found out Wells Fargo SOLD my mortgage to Fannie Mae, unbeknownst to me, on June 24, 2009. This is what makes me inelgibile for Harp 2. VERY FRUSTRATING AND UNFAIR! Does this sound right to you?

    • http://www.credit.com Gerri

      It doesn’t sound “right” to me in the sense that it’s not right to make this program so difficult that few homeowners can take advantage of it, but it does sound par for the course in terms of what we are hearing from borrowers.

      Here is a summary of the guidelines. Unfortunately if the loan was sold to Fannie Mae before May 31, 2009 it is not eligible. The best you can do now is to complain to your elected officials in Washington.

      • peg

        so Nima should be eligible then if I read this right – you said if sold before May 31, 2009 it is not eligible and Nima says was sold to Fannie on June 24, 2009 – which is after.

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  • Gerri Detweiler

    We received the following email from a reader who is trying to refinance under HARP 2 and ran into a snag. I think it’s instructive for other readers to understand how late payments can hurt you, even if they don’t show up on your credit reports.

    “My mortgage company says that I have more than one 30 day late showing on my account. It was not reported to the Creditburea Because I made the payments on the 30th day. Does that mean that I cannot qualify with another company for Harp2?”

    My response: Unfortunately by cutting it so close, you have probably jeopardized your chances of getting a HARP 2 refinance for a while. While it’s true that most mortgage companies don’t report you late to the credit reporting agencies unless you are more than 30 days late with a payment, a mortgage refinance can turn up the payments that were exactly 30 days late. When you apply for a mortgage, the prospective lender will often send your current lender a Verification of Mortgage Form which the lender fills out detailing the payment history on the loan. That form includes a question about how many times the current borrower has been 30 days late. It could be that those payments showed up there. Or it could be that you were trying to refinance with your current lender who has information about your payments and can see that you were 30 days late.

    You can certainly check with another lender to see if they can help you, and we would suggest you do just to be certain. (Do mention what happened to them because you don’t want to get too far into the process then find out it’s a problem.) If they can’t help you, though, you’ll need to try to pay earlier for the next twelve months then apply again.

  • ScottSheldonLoans

    I would continue to work with them and see what all of your options are. The lender will be looking for income to offset the mortgage payment and as long as the new mortgage payment they propose is not more than 31% of your income that’s what they are going to stick by. The mortgage payment will be comprised of taxes and insurance and of course principal and interest. Not making your mortgage payment is going to get their attention, but at the same time that will start the foreclosure process clock. I would absolutely work with them as much as you possibly can given these unique circumstances. Perhaps you might suggest modifying the mortgage again perhaps reducing the principle balance and taking the other half of the principle and making it an interest-free second mortgage type the property that is paid off when the property is refinanced in the future or sold.

  • http://www.Credit.com/ Gerri Detweiler

    Have you talked with a housing counselor? I would suggest you visit HUD.gov to find one on your area and see what suggestions they have. Their services will likely be free.

  • http://www.Credit.com/ Gerri Detweiler

    Of course! Please let us know what happens.

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- The Credit.com Editorial Team