HARP 3.0 Mortgage Bill Has Been Introduced in Congress
In 2012, Senators Barbara Boxer and Robert Menendez unsuccessfully attempted to push through the Homeowners Refinancing Act of 2012, also known as HARP 2.0. The purpose of the bill was to assist home owners in the United States who were suffering under the weight of an underwater mortgage. Part of the benefit to home owners of the bill would be getting lower mortgage rates.
Redrafted as the Responsible Homeowner Refinancing Act of 2013, also known as HARP 3.0, the proposal from the senators now looks to remove closing costs from the mortgage loan process and make it easier for a home owner to change the financial entity with which they have a mortgage. One of the fees slated to be eliminated is the closing costs associated with the signing of a mortgage.
What Is HARP?
Originally created in 2009, the Home Affordable Refinance Program (HARP) offered homeowners the chance to refinance with lower mortgage rates if their Fannie Mae or Freddie Mac mortgage had lost value since the peak of the housing boom. The program negated the need to obtain new private mortgage insurance coverage, so a significant cost of refinancing a home was eliminated.
The way in which the Home Affordable Refinance Program HARP originally worked is that a home owner who originally put down at least 20 percent of their home’s value down would be eligible to refinance without private mortgage insurance coverage fees coming into play.
HARP 2.0 vs. HARP 3.0
Expansion of the program in 2011 to the HARP 2.0 program offered additional benefits to home owners, which made it easier for home owners who were suffering from a significant drop in the value of their home to qualify for the HARP program. The “loan to value” cap of 125% from the original Home Affordable Refinance Program was completely eliminated, which meant people in markets devastated by the recession like Florida and Nevada could qualify for refinancing.
In addition, the expanded program also introduced protections for homeowners who had an underwater mortgage by placing caps on the potential loan fees. For homeowners suffering from a significantly underwater mortgage, or owners who wanted to refinance to a 15-year fixed rate loan, the program drastically reduced the costs of the application.
The first version of the Home Affordable Refinance Program in 2009 was a tremendous success as far as helping individuals to climb out of debt. Numbers suggest that over three years, at least a million home owners in the United States benefited from the first incarnation of the program. Even better, were the statistics that came from the second version of HARP, which suggested that another million home owners were assisted by the program in just nine short months.
The latest version of the program, HARP 3.0, looks to help home owners further in recovering from recession-induced mortgage debt. Some of the changes to the newest version of the program include loosening the various requirements of getting a refinance. Changes to income and employment requirements are slated for change as are the accepted numbers for appraisal and closing costs.
One of the biggest changes of the new HARP bill is a reduction in fees charged upfront to borrowers. When a homeowner must apply for a refinance with a particularly high loan-to-value ratio, the fees may end up being lower than those charged to individuals with a healthier ratio. This part of the bill is an unexpected change since a high loan-to-value ratio during a refinance constitutes a rather significant risk to the lender.
Regarding the changes made to the income and employment requirements, the newest HARP program wouldn’t require an income or employment verification check. The verification process for such applications was already considered quite lenient, but the new bill would make it even easier to gain approval.
HARP 2.0 and the first version of the program already required home owners to showcase a healthy payment history, the new Responsible Homeowner Refinancing Act would help to simplify the overall application process by removing certain checks. This is a similar philosophy to the FHA Streamline Refinance program, and the VA Streamline Refinance Program – also known as the Interest Rate Reduction Refinance Loan (IRRRL). A final change to the most recent version of the act would include changes to the appraisal process where an in-home check would no longer be required.
Beyond those changes to the qualification and application process, the new Menendez-Boxer Bill doesn’t look that different from earlier versions. One element, which may impact some home owners seeking lower mortgage rates under the bill, would be the requirement that an applicant not have benefited from the HARP program in the past. Regardless, the new bill looks to assist a great many more home owners in the future.