HARP 2 ? Not So Fast! Near Murrieta, Temecula, Oceanside, San Diego... California
HARP 2.0 in Murrieta, Temecula, Oceanside, San Diego... California. Like Larry from IL says below, "We have it...we're doing them. I like my clients, but I don't like HARP 2. Be patient, folks. It's not all things to all people."
Though the early rate comparisons have our wholesale HARP 2.0 rates as better than those found for the true HARP 2.0 on the retail side.
Read on to see What is HARP 2.0 and why most lenders will make it harder or more expensive to do than if the borrower had equity.
Then again, if the borrower already has a Fannie or Freddie loan, sold on the after market before June of 2009 and has negative equity, getting the interest rate down into the zone where rates are now could save people a couple hundred dollars per month and ease that monthly pain. Consult a professional for your situation...
I have been contacted by, what seems like, 1.2 million people wanting to take advantage of HARP 2.
What is HARP 2?
Do you want the technical version or the easy to understand version? The easy to understand version is this. It's a government program that allows homeowners to refinance their current mortgage irresective of the home value...provided the original mortgage was insured by Fannie or Freddie prior to June of 2009.
So What's the Issue?
- Most Lenders Don't Want to Lend under HARP 2. Why? Because they currently ha
ve a loan that's paying on time. Despite the fact that a new loan is actually good for the borrower, the new loan may actually be a security that is much worse than the original security. For example, maybe the original mortgage was based upon a 95% LTV property, but now, under HARP 2, the new loan that has been created is at a 115% LTV. The new investor doesn't want this loan for two reasons. First, it's a worse security risk than the original loan that was created. Secondly, the mortgage company may have to pay a penalty if the new loan goes into default. The odds are, if the borrower hasn't gone into default on the original loan, then, by now, the current lender would have no penalty. It's hard to imagine that a company wants to expose itself to new loan liability when they were past the stage of any liability prior to the new refinance. (image is provided by www.dreamstime.com)
- And....the property???? Well what used to have 5% equity is so upside down that there is nothing that excites the new lender enough that they want to assume that risk.
- As a result....most HARP lenders are creating massive overlays for HARP 2. That means that what the government wants to have happen, won't.....or at least not the way it was intended. If it does go through...
- It's likely to be a lot more expensive to the consumer than the current market rates for grade A borrowers with equity. There are what are called Lender Overlays. With something this expensive, and risky for a lender, they are going to add overlays or price adjustments for the worse for taking on this risk.
- Second Mortgages are more difficult to subordinate. The reality is that there are second mortgage companies who will not get back in 2nd lien position during HARP. Why??? Because often times they are re-undewriting the files. And a 125% CLTV isn't in their loans we want department. What they fail to realize is that they own the 2nd mortgage either way...why not provide a little relief to the borrower.
HARP 2 IS AWESOME...BUT IT'S NOT GOING TO WORK FOR MANY.
We have it...we're doing them. I like my clients, but I don't like HARP 2. Be patient folks. It's not all things to all people.
If you choose, you can find me here:
NMLS ID#158606
An Illinois Residential Mortgage Licensee
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