Updates to the Home Affordable Refinance Program (HARP)

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MBS News and Announcements

Updates to the Home Affordable Refinance Program (HARP)

Today Fannie Mae published an announcement in accordance with changes announced by the Federal Housing Finance Agency ("FHFA") to the Home Affordable Refinance Program ("HARP") in an effort to attract more eligible borrowers who can benefit from refinancing their mortgage loans.

Program Extension

Fannie Mae is removing the maximum LTV ratio limit under the HARP program for mortgage loans secured by fixed-rate mortgages with terms up to 30 years. This includes loans with terms of 15 years, which were previously restricted to a maximum LTV ratio of 105 percent. There continue to be no limits on the CLTV or HCLTV ratios.

The maximum LTV ratio limits for all occupancy and property types are:

  • no maximum for fixed-rate mortgages with terms up to 30 years,
  • 105 percent for fixed-rate loans with terms greater than 30 years up to 40 years, and
  • 105 percent for ARMs with initial fixed periods greater than or equal to five years and terms up to 40 years (as permitted by the ARM plan).

New MBS Prefixes for Issue Dates on or After June 1, 2012

In addition to the CQ prefix, which is currently available for pooling 30 year fixed-rate mortgages with LTV ratios greater than 105 percent and up to 125 percent, Fannie Mae will issue the following new prefixes on a later date.

CV - Conventional Intermediate-Term, Level-Payment Mortgages; Single-Family; maturing or due in 15 years or less. The pool is comprised entirely of mortgages with loan-to-value ratios greater than 105 percent and less than or equal to 125 percent.

CR - Conventional Long-Term, Level-Payment Mortgages; Single-Family; maturing or due in 30 years or less. The pool is comprised entirely of mortgages with loan-to-value ratios greater than 125 percent.

CW - Conventional Intermediate-Term, Level-Payment Mortgages; Single-Family; maturing or due in 15 years or less. The pool is comprised entirely of mortgages with loan-to-value ratios greater than 125 percent.

These prefixes will be available for conventional, fixed-rate mortgages delivered into MBS with issue dates on or after June 1, 2012.

Changes to Underwriting Requirements

Fannie Mae is changing several of the underwriting requirements for mortgage loans delivered under the HARP program. Such changes relate to payment history requirements and refinances related to payment history requirements, policies related to borrower bankruptcy and borrower benefits as well as the establishment of a new policy requiring requalification of borrowers if the new mortgage loan significantly increases the borrower's monthly payment amount. Please see the announcement for more information related to such underwriting requirements.

Permissible Refinance Solicitation Practices

At the direction of the FHFA, Fannie Mae is modifying the policies by which lenders can solicit borrowers for a HARP refinance. Where the mortgage loan has an LTV ratio greater than 80 percent:

  • Lenders may solicit borrowers with mortgage loans owned or securitized by a particular GSE, provided that the lender simultaneously applies the same advertising and solicitation activities with respect to borrowers of mortgage loans with LTV ratios greater than 80 percent and owned or securitized by the other GSE, and
  • Lenders must apply the same advertising and solicitation activities to all mortgage loans with LTV ratios greater than 80 percent and serviced for a particular GSE, regardless of whether the lender or a third-party owns the associated Fannie Mae MBS pools or Freddie Mac PC pools.

Where the LTV ratio is 80 percent or less, lenders must continue to comply with established Fannie Mae policies with respect to solicitations.

Clarification of Lender Representations and Warranties

Fannie Mae is waiving certain representations and warranties to which lenders commit with respect to the origination of mortgage loans under the HARP program. Investors should consult the announcement for specific details pertaining to the new requirements.

Market participants should consult our July 1, 2011 Single-Family MBS Prospectus for information regarding the impact of refinancing on MBS investors. Investors may also contact our Fixed-Income Securities Helpline at 1-800-BEST-MBS (1-800-237-8627) if they have additional questions.

Originally Published: November 15, 2011