I sat down with the Broker of MN Capital, Michael TenEyck, and we discussed the HARP program in detail. We both came to the same conclusion that the media does not explain the program correctly so how is the average homeowner to even know it is an available option. Most people seem to think that the HARP program is a loan modification program or it will damage their credit. That could not be any further from the truth! I will list several points to the program that are the most common misunderstood.
What is the HARP 2.0 Program? The program allows mortgage note holders of Fannie Mae or Freddie Mac the option to refinance their existing mortgage regardless of your current loan to value.
I make my payments to Bank “X” so don’t they own my loan? – Well in many cases the Bank you make your payment to does not own your mortgage note. Many mortgages are owned my Hedge Funds, Fannie Mae and Freddie Mac.
My Bank says I do not qualify do to my LTV – This is very common as many banks have self-imposed restrictions that they have placed on the HARP 2.0 program. As stated above the program does not have loan to value restrictions. Banks provide a service to the actual mortgage note holder as a “Servicer” much like a property manager does if you have every rented a place to live.
So how can MN Capital refinance my mortgage with the HARP 2.0 Program and my bank cannot? – If you are not in the finance business you most likely would not be in a position to understand that banks do not like all loan programs. If you were to think of the banks as Car Dealerships then this makes more sense. For example you would not take your Ford to the Chevy Dealer for repairs. So for my auto metaphor your loan program is your type of vehicle. The difficult part is to fully understanding the proper Lender or Broker that you need to use to max your benefit as there is no sticker price to start from.
Do I need an appraisal? – In most cases no. The loan to value is not a factor for approval but with that said there are some restrictions in terms of rate if your LTV is over 125%. The impact is generally within .125% in terms of rate.
The HARP 2.0 program is only available to property owners with mortgage notes that are owned by either Fannie Mae or Freddie Mac. Currently Congress is working out the details for HARP 3.0 which should open up the program for all property owners. The one unknown is will the current note holders participate in the program. This would require the current note holders to take a reduced return on their investment. As a property owner this sounds great as you benefit from a reduce payment but there is one serious issue. Most of the additional mortgage notes are funded with 401K money. So that right we will experience a reduced return on our 401K investments. So at this time is it unclear how Congress will entice the Hedge Fund Managers to exercise the HARP 3.0 option. Time will tell.