Big Four Sign Onto HARP 2.0

Big Four Sign Onto HARP 2.0 Posted 12-19-2011 5:29 pm by Anton Stetner
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Big Four Sign Onto HARP 2.0

The Home Affordable Refinance Program (HARP) is being revamped and the top four mortgage companies, Bank of America, Chase, Citigroup, and Wells Fargo have announced their intention to participate in the program. The revamped HARP program or what is being called HARP 2.0 will allow underwater homeowners who are current on their mortgage to refinance and possibly save up to $200 per month on mortgage payments.

The new HARP will also allow the new lender to forgo the assumption of existing underwriting deficiencies that may have occurred with the original loan -- a move that some experts claim will stimulate lending activity and booster the economy. HARP 2.0 will also remove the 125 percent loan-to-value (LTV) cap allowing borrowers with an LTV ratio above 80 percent to participate in the refinancing program. But what does this mean for REO investors? For those REO investors waiting for prices to drop, HARP 2.0 might prevent some strategic foreclosures we’ve been experiencing for the past few years, which will shrink the pool of REOs and may prevent prices from falling further. Homeowners underwater on their mortgages may decide to try HARP 2.0 instead of letting their home fall to foreclosure; but that’s only if they are current on their payments and that’s a big if. Some critics of HARP’s reinvention claim that savings on monthly mortgage payments may be exaggerated. According to some calculations, the average homeowner may not save any more than $30 per month, much of it eaten up by fees. If this is the case, the HARP program may actually accelerate foreclosures sending a second (or third) wave of REOs onto the market and driving down housing values even more. blog