March 29th, 2012 2:34 PM by Richard T. Cirelli
ARE BIG BANKS TAKING ADVANTAGE OF UNDERWATER BORROWERS?
The big banks have given us yet another reason not to trust or like them.
The guidelines are out for the new version of the Home Affordable Refinance Program, known as HARP2. This program allows homeowners that are underwater (they owe more than their home is worth) to refinance to a lower interest rate regardless of how deep under water they are. The previous version had too many restrictions that prevented lenders from allowing refinances above 105% of the value.
But now, the nation's largest banks are charging borrowers who refinance under the Home Affordable Refinance Program significantly higher rates than other types of refinance loans, according to Amherst Securities Group.
The new program requires a slight charge for loan amounts above 80% Loan-to-Value (LTV). But, the big banks are charging more. Amherst found that in February Freddie Mac's HARP borrowers with loan-to-value ratios from 80 to 90 paid .21% more than borrowers with other types of loans. Borrowers with LTVs of 100 to 105 paid .41% more and those with LTVs 105 to 125 paid .53 % more. Results for Fannie Mae are similar.
Fannie, Freddie and the Federal Housing Finance Administration have given banks the ability to extract excess profits from these loans, and the big banks are taking advantage of this opportunity," Amherst discovered that HARP activity is highly concentrated among Wells Fargo, JPMorgan Chase, and Bank of America.
There is only one solution — increased competition! And there are lenders that are offering the product without the additional rate or fees. A mortgage broker with access to multiple lenders will know how to avoid the big banks and place your loan with the right lender to save the cost.
How To Take Advantage of HARP:
The first step is to determine if Fannie Mae or Freddie Mac owns your loan. It’s easy to find out at these two websites:
Fannie Mae: http://www.fanniemae.com/loanlookup/
Freddie Mac: https://ww3.freddiemac.com/corporate/
If Fannie or Freddie own your loan, you need to confirm that your loan was closed prior to June 1, 2009. If so, you should be eligible to refinance.
Benefits and Requirements:
· In many cases, an appraisal is not required and the income and asset documentation required is minimal.
· If a second mortgage exists, that lender must be willing to subordinate their loan to the new first mortgage. No new secondary financing is allowed
· The borrower must not have been late with their payments within the past 6 months and not more than once in the past twelve months
· The property being refinanced can be a Primary, Second or Investment home
There are many other factors that could apply so please call to discuss your personal situation.