I received the following email from a reader asking about the federal government’s Home Affordable Refinance Program (HARP) earlier this week:
I have been looking into the HARP 2.0 program to refinance my home. I qualify according to program guidelines, but find it hard to shop interest rates and find lenders that deal honestly with the HARP program.
I am wondering if many of your readers have personally dealt with HARP 2.0 now that it has some time to mature? I also I would be interested to find out for loans that were originated under HARP 2.0, how did the interest rates compare to the average current rate for the same type of loan? I have read that the banks are gaming the rates and charging higher rates for HARP loans even when the borrower has excellent credit.
Any info or the power of Seattle Bubble would be much appreciated.
This is a topic that I don’t personally have much knowledge in, so I reached out to some local professionals. First up, here’s what real estate educator Jillayne Schlicke had to say:
Interest rates quoted in the media are very deceptive. Just Google “mortgage rates __insert your city__” and see how many companies are advertising 3.0, 2.5,2.0 and so forth mortgage rates when those rates are for an ARM loan or a 10 year amortized loan or a loan for a person with 50 percent equity and an 800 credit score. Very deceptive. So a typical HARP borrower will make application and be surprised to see rates in the high 3s or above 4.0%.
Very few people actually qualify for those great, low rates. In the future I predict that lenders won’t be allowed to advertise rates OR they will only be allowed to advertise an APR. But that’s a different story for a different day.
Even when a HARP 2 borrower has excellent credit, the borrower owes more than the home is worth. This in itself makes the loan a very high risk loan.
Lenders charge higher rates and fees for high risk loans because when a person owes more than the home is worth and then another financial distress event happens, these borrowers are more likely to default vs. continue paying as agreed.
I would encourage you to make application with at least three different lenders. Here are three referrals of people I personally would use for my own loan:
I second the recommendation of Rhonda Porter. And not just because she painted me a pink pony. We used her when we bought our home and were very satisfied. And speaking of Rhonda, she happens to be the second professional I reached out to on this subject. Here’s what she had to say:
Many borrowers are disappointed with HARP 2.0 when they learn that rates are higher based on how high the loan to value is. Lenders have “risked based pricing” and very few are offering unlimited LTVs. Some of the lenders who have offered the unlimited LTVs have become so inundated with volumes, that they are refusing new applications (CMG and EverBank). Those who made into the pipeline in time are finding that it’s taking a couple months to close the loans. It’s frustrating for everyone.
We are constantly receiving updates from the lenders we work with stating that they are no longer accepting new HARP 2.0 applications unless they are the current mortgage servicer (we can send them back to the existing bank). We still have other resources as well but it’s a matter of knowing every lenders underwriting “overlays” that they add to the guidelines.
Rhonda also sent over a link to an entire post she wrote on this subject at her own blog: How loan to values impact pricing for refinances, including HARP 2.0
I’d also be interested in hearing from the readers on this one. Has anyone out there had first-hand experience working with the HARP 2.0 program?