A surge in refinance demand is
expected once the new HARP guidelines
are announced on Tuesday, Nov. 15. That means those qualified borrowers who get their applications in first will be the first to get approved. Since lenders can only process so many applications at once, those who get in later could end facing could complicate things as they try to sort out how to apply the rules to individual cases. significant delays.
are announced on Tuesday, Nov. 15. That means those qualified borrowers who get their applications in first will be the first to get approved. Since lenders can only process so many applications at once, those who get in later could end facing could complicate things as they try to sort out how to apply the rules to individual cases. significant delays.
Complicating
the situation is that lenders are still going to be coming up to speed
on the new guidelines over the next few months, which could delay things
as well.
Demand could drive up interest rates
On
top of that, it’s quite likely the increased demand will drive up
mortgage rates, partly because it will enable lenders to manage demand.
While a steep increase isn’t likely, a rise of a quarter to half a
percentage point is quite possible over the coming months, assuming the
new rules open up the program to as many borrowers as industry insiders
expect.
Bottom line: Get your application in
soon, if you’re planning to do a HARP refinance. And don’t assume a
30-day rate lock will be long enough to see you through the process.
Many loan officers and mortgage brokers are recommending that borrowers
lock in for 60 days and even that may not be enough if there are
complicating factors like a second mortgage.
Loan-to-value cap lifted
HARP,
of course, is the government-backed program for refinancing underwater
mortgages. The key change in the new program guidelines is that
refinancing will be allowed no matter how far a borrower’s home value
has declined, or how far underwater they are on their mortgage – i.e.,
in negative equity, or owing more than their home is worth.
Unfortunately,
lenders aren’t going to be in position to start approving mortgage
refinances under the new HARP guidelines as soon as they come out on
Nov. 15. Most likely, it’s going to take until at least Dec. 1 and in
many cases considerably longer before they start applying the new rules.
JP Morgan Chase, for instance, has indicated it doesn’t expect to have
its HARP II program ready until sometime in the first quarter of 2012.
Lenders need to study the new rules, understand them and come up with
their own guidelines for how they’ll handle the program.
Can refinance with any participating lender
One
of the great things about the new iteration of HARP is that you won’t
be stuck refinancing with your current mortgage lender or servicer.
Under the new guidelines, you can seek to refinance through any
participating lender. So you can start shopping around immediately to
see who’s ready to start accepting applications, as well as comparing
offers from different lenders.
Keep in mind,
though, that HARP is a voluntary program for lenders and each will have
its own rules on top of the ones established by the government. These
“lender overlays” may restrict the type of loans they’ll refinance – for
example, an individual lender may decline to refinance a mortgage that
is too far underwater, even though the HARP program itself has no such
limit.
Other main requirements are that the
mortgage has to be backed by either Fannie Mae or Freddie Mac, was
originated no later than June 1, 2009 and you have to be up to date on
your mortgage payments. The program runs until Dec. 31, 2013.
mortgageloan.com
