Home Affordable Refinance Program (HARP) Enhancements

Categories in this update:

November 15, 2011

To support the recently announced Home Affordable Refinance Program (HARP) enhancements, Freddie Mac Single-Family Seller/Servicer Guide (Guide) Bulletin 2011-22 provides you with revised requirements for Freddie Mac Relief Refinance Mortgages^SM — Same Servicer and Relief Refinance Mortgages — Open Access offerings. A portion of these offerings, mortgages with loan-to-value (LTV) ratios greater than 80 percent, represents our business implementation of HARP.

In addition, the Bulletin announces revisions to the requirements for Relief Refinance Mortgages — Same Servicer and Relief Refinance Mortgages — Open Access with LTV ratios less than or equal to 80 percent. These requirements, which are not part of the HARP implementation, will help you reach more borrowers who have greater equity and are looking to refinance.

Originate & Underwrite

Developed at the direction of the Federal Housing Finance Agency, these new requirements announced for our Relief Refinance Mortgage with LTV ratios greater than 80 percent offer greater opportunity for you to reach more eligible borrowers, including those who, because of declining property values, have not been able to take advantage of current low interest rates.

Key changes to Relief Refinance Mortgages — Same Servicer and Relief Refinance Mortgages — Open Access:

• Expanded borrower eligibility: To help you reach more borrowers, we’re removing the maximum LTV ratio of 125 percent for fixed-rate Cash and fixed-rate Guarantor mortgages (the 105 percent maximum LTV ratio for ARMs will remain the same). We’re also adding a borrower benefit provision that allows refinancing for the purpose of reducing the monthly principal and interest (P&I) payment, and modifying our mortgage payment history requirements for Relief Refinance Mortgages – Same Servicer and Relief Refinance Mortgages – Open Access.
• Greater use of Home Value Explorer® (HVE): Our revised requirements provide you with additional property valuation options by allowing the use of HVE, our automated valuation model, for Relief Refinance Mortgages — Same Servicer for certain 2-unit properties (previously only for certain 1-unit properties), and for Relief Refinance Mortgages — Open Access for certain 1- to 2-unit properties.

Key changes to Relief Refinance Mortgage — Same Servicer with LTV ratios greater than 80 percent:

• Revised borrower eligibility: Updates are being made to requirements for when the P&I payment on the new refinance mortgage increases by more than 20 percent, as well as to requirements for income verification.
• Borrower solicitation updates: Specific requirements related to solicitations, advertising, and other communications to borrowers are being updated to allow Sellers to target borrowers of mortgages that are owned or securitized by Freddie Mac and that may qualify for Relief Refinance Mortgages — Same Servicer. Such solicitations must be similar across the servicing portfolios for both Freddie Mac and Fannie Mae.

Key changes to Relief Refinance Mortgage — Same Servicer and Open Access with LTV ratios less than or equal to 80 percent:

• Revised borrower eligibility: Requirements are being updated to reflect a maximum total LTV (TLTV) and Home Equity Line of Credit (HTLTV) ratio of 105 percent. We also are updating requirements to provide borrowers with more flexibility for their use of refinance proceeds.

Key changes to Relief Refinance Mortgage — Same Servicer with LTV ratios less than or equal to 80 percent:

• Revised borrower eligibility: The requirements for borrower eligibility are being updated. Changes include minimum Indicator Score, requirements for verification of funds for closing and source of income, and changes when the P&I payment on the new refinance mortgage increase by more than 20 percent.

These changes have multiple effective dates that are detailed in Guide Bulletin 2011-22.

Loan Prospector® Updates: Loan Prospector will be updated on or before March 15, 2012, to assess Relief Refinance Mortgages — Open Access with LTV ratios greater than 125 percent. The HVE estimate returned on Loan Prospector Feedback Certificates can then be used to determine property values for Relief Refinance Mortgages — Open Access. Until Loan Prospector is updated, loan assessments for Relief Refinance Mortgages — Open Access with LTV ratios greater than 125 percent cannot be completed.

Loan Prospector has not been updated to reflect the maximum 105 percent TLTV and HTLTV ratios for Relief Refinance Mortgages — Open Access with LTV ratios less than or equal to 80 percent. Sellers must ensure that this requirement is manually applied.

Sell & Deliver

Updates included in today’s Guide Bulletin introduce the expanded use of existing execution outlets and flexibility when selling Relief Refinance Mortgages to Freddie Mac. These changes have multiple effective dates that are detailed in Guide Bulletin 2011-22.

Our revised requirements include:

• Expiration date extension: The expiration date of our Relief Refinance Mortgage offering is being extended to December 31, 2013. To be eligible for refinancing under this offering, mortgages must have note dates on or before December 31, 2013.
• Representation and warranty relief: For Relief Refinance Mortgages — Same Servicer with LTV ratios greater than 80 percent, Sellers will no longer be required to retain certain Seller representations and warranties on the mortgage being refinanced.
• New execution options: To support the lifting of the maximum LTV ratio requirement for fixed-rate Relief Refinance Mortgages — Same Servicer and fixed-rate Relief Refinance Mortgages — Open Access with LTV ratios greater than 125 percent, we are introducing a Cash and Guarantor execution option.
• Relief Refinance Mortgage delivery fee cap adjustments: For mortgages with settlement dates on or after January 3, 2012, delivery fee caps are being reduced for certain property types and amortization terms for Relief Refinance Mortgages with LTV ratios greater than 80 percent. As a result of these changes, Relief Refinance Mortgages with LTV ratios greater than 80 percent will have the following revised delivery fee caps:
• Zero basis points for non-investment property fixed-rate mortgages with amortization terms of less than or equal to 20 years.
• 75 basis points for non-investment property fixed-rate mortgages with amortization terms of more than 20 years.
• 75 basis points for non-investment property mortgages that are ARMs.
• 200 basis points for investment property mortgages.

Delivery fee caps for all other mortgages remain unchanged. All applicable delivery fees will continue to be assessed, including the Market Condition fee; however the updated delivery caps will be applied.

Exhibit 19, Postsettlement Delivery Fees has been updated to reflect these changes.

Changes to Freddie Mac Relief Refinance Mortgages announced in today's Guide Bulletin are effective for application dates on or after December 1, 2011. To assist you with pipeline coverage, Relief Refinance Mortgages — Same Servicer and Relief Refinance Mortgages — Open Access requirements in effect prior to January 3, 2012, will continue to be eligible for sale to Freddie Mac as long as the loan application date is before December 1, 2011, the note date is on or before January 31, 2012, and the Freddie Mac settlement date is on or before April 30, 2012.

For More Information:

A Government Program That Might Actually Work? The New HARP Refinance Program

For more information on the New HARP Program Click Here:

New Harp Program Guidelines

Great News for Underwater Homeowners Changes to HARP Program Announced

• Read Guide Bulletin 2011-22.
• Review Guide Chapters A24 B24, and C24, and Guide Section 46.26 to become familiar with the enhancements being made to Freddie Mac Relief Refinance Mortgages.
• Review the Summary of Changes to the Freddie Mac Relief Refinance Mortgage Offering Eligibility Requirements (available soon).
• Visit the Learning Center for additional training and resources, including registering for our upcoming webinar on Guide Bulletin 2011-22.