Combining Hardest Hit Funds with Existing Refinance Programs Can Help Millions of Underwater Homeowners

There are five existing refinance loans available for underwater homeowners that allow for:

  • new secondary refinancing
  • no maximum combined loan to value (CLTV) of the 1st and 2nd mortgage
  • mortgage payments to stay current

This could enable Hardest Hit Funds to be used as a new second mortgage to refinance underwater higher 2nd mortgages and reset interest only home equity lines of credit unable to be refinanced.

One of these mortgages, the FHA Short Refinance, can even provide a refinance where none is available for conventional 1st mortgages that are not Fannie Mae or Freddie Mac, therefore not eligible for the Home Affordable Refinance Program (HARP).

The five refinances are:

  1. Fannie Mae DU Refi Plus Home Affordable Refinance Program (HARP) for existing Fannie Mae conventional 1st mortgages
  2. Freddie Mac Relief Refinance (HARP) for existing Freddie Mac conventional 1st mortgages
  3. FHA Short Refinance for negative equity non-FHA 1st mortgages
  4. FHA Streamline for existing FHA mortgage
  5. VA Interest Rate Reduction Refinance Loan (IRRRL)

Written Guidelines for Five Refinances

[1]Fannie Mae DU Refi Plus (HARP): B5-5.2-01: DU Refi Plus and Refi Plus Eligibility (03/29/2016)B5-5.2-01: DU Refi Plus and Refi Plus Eligibility (03/29/2016)

  • No Maximum Loan to Value (LTV) ratio for fixed rates and No Maximum Combined Loan to Value (CLTV) and Home Equity Combined Loan to Value (HCLTV) ratio. (pg. 2)
  • Eligible Subordinate Financing
    New subordinate financing is only permitted if it replaces existing subordinate financing. (pg. 2)
  • Using Hardest Hit Fund Programs for Principal Reduction or Closing Cost Assistance
    Housing Finance Agencies (HFAs) have established programs utilizing Hardest Hit Fund (HHF) programs, which provide funding for various purposes, including funds for principal curtailment, to help homeowners obtain more affordable mortgages or to help homeowners retain their homes. (pg. 3)
  • [2]Existing mortgage must be current for last 12 months. (pg. 3)

The Home Affordable Refinance Program (HARP) will expire on Dec. 31, 2016.

[3]Freddie Mac Relief Refinance Mortgages (HARP) – Same Servicer and Open Access: 2016

  • No maximum Loan to Value (LTV) ratio for fixed-rate mortgages and maximum LTV ratio for ARMs is 105 percent. There are no maximum Total Loan to Value (TLTV) or Home Equity Total Loan to Value (HTLTV) ratios. (pg. 2)
  • Secondary Financing

Existing junior liens may be refinanced simultaneously with the first mortgage provided the junior lien is being refinanced for one of the following purposes:

  • A reduction in the interest rate of the junior lien, to replace an ARM, a balloon or call option with a fixed-rate, fully amortizing junior lien.
  • A reduction in the amortization term or the monthly payment of the junior lien. (pg. 4)
  • [4]Evaluating Borrower’s Credit Reputation

If an Accept is received through Loan Prospector, the credit reputation is acceptable. Otherwise, the homeowner must show they have been making payments on time for the last 12 months. (pg. 1-2)

 

The Home Affordable Refinance Program (HARP) will expire on Dec. 31, 2016.

[5]FHA Short Refinance

Allows refinance of a non-FHA-insured Mortgage in which the Borrower is in a negative equity position. (Pg. 416)

  • The new loan’s maximum LTV ratio is 97.75% of the current property value.
  • There is no maximum CLTV ratio for second liens held by government entities or instrumentalities of government. (pg. 416)
  • Borrower must be current on the existing mortgage, or have successfully completed a qualifying three-month trial payment plan. (pg. 416)

 The FHA Short Refinance program expires on Dec. 31, 2016.

 [6]FHA Streamline Refinance

  • Proceeds are used to extinguish an existing FHA-insured first mortgage lien. (pg. 407)
  • There is no maximum CLTV with subordinate financing. (pg. 414)
  • New subordinate financing is permitted only where the proceeds of the subordinate financing are used to:
    • Reduce the principal amount of the existing FHA-insured Mortgage, or finance the origination fees, other closing costs, or discount points associated with the refinance. (pgs. 413-414)
  • No more than 1 x 30 day late on mortgage in last 12 months. (pg. 409)

[7]VA Interest Rate Reduction Refinance Loan (IRRRL)

  • VA is not concerned about the 2nd mortgage being refinanced, other than it must be assumable.

VA Loan Center: FL/homeloan@va.gov. 4/4/16: per Nancy, 727-319-7500.

  • The IRRRL must replace the existing VA loan as the first lien on the same property. Any second lien-holder would have to agree to a subordinate to the first lien holder. (pg. 6-7)
  • The prior loan is current (not 30 days or more past due) at the time of loan closing. (pg. 6-12)

[1]

[2] B5-5.2-02: DU Refi Plus and Refi Plus Underwriting Considerations (09/29/2015): https://www.fanniemae.com/content/guide/selling/b5/5.2/02.html and Fannie Mae Mortgage Delinquencies: https://www.fanniemae.com/content/guide/selling/b3/5.3/09.html

[3] Freddie Mac Relief Refinance Mortgage -Open Access: http://www.freddiemac.com/singlefamily/factsheets/sell/relief_refi_open_access.html

[4]Freddie Mac Seller/Servicer Guide, Chapt. 5201.1: Credit Assessment with Loan Prospector, (b)Evaluating borrower’s credit reputation and (d)significant inaccurate credit information: http://www.allregs.com/tpl/main.aspx

[5]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[6]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[7]Benefits.VA.gov, Ch 6: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjpy4TvwPTLAhUCRSYKHXu9AEEQFgg0MAE&url=http%3A%2F%2Fwww.benefits.va.gov%2Fwarms%2Fdocs%2Fadmin26%2Fpamphlet%2Fpam26_7%2Fch06.doc&usg=AFQjCNEf3ujFlgh6GVKHIZXGiJkKfYaBXg&sig2=aC5d5K1lPKZWRLOkL6u-wQ

 

[1]Freddie Mac Seller/Servicer Guide, Chapt. 5201.1: Credit Assessment with Loan Prospector, (b)Evaluating borrower’s credit reputation and (d)significant inaccurate credit information: http://www.allregs.com/tpl/main.aspx

[1]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[1]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[1]Benefits.VA.gov, Ch 6: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjpy4TvwPTLAhUCRSYKHXu9AEEQFgg0MAE&url=http%3A%2F%2Fwww.benefits.va.gov%2Fwarms%2Fdocs%2Fadmin26%2Fpamphlet%2Fpam26_7%2Fch06.doc&usg=AFQjCNEf3ujFlgh6GVKHIZXGiJkKfYaBXg&sig2=aC5d5K1lPKZWRLOkL6u-wQ

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