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HARP Program Update: Lender Incentives Up to $2,000

By: | February 6th, 2013

Fannie Mae released an update to their selling guide on January 29th which now allows lender incentives up to $2,000 for borrowers. This HARP program update will now make HARP loans even more affordable for underwater borrowers who choose to refinance.

As a way to encourage more borrowers to come forward and refinance through HARP, the Home Affordable Refinance Program, Fannie Mae announced that lenders will be allowed to offer a refinancing incentive that can be used in several ways. Lenders will also be permitted to offer additional incentives to borrowers for all transaction types.

For HARP refinances, the lender may provide an incentive to the borrowers in the form of a payment to pay off a portion of the mortgage being refinanced as long as the amount of the incentive is not more than $2,000; no repayment is required; and the payment is reflected on the HUD-1 Settlement Statement as a lender credit. Since the lender is not considered an interested party contribution (IPC), the incentive is not considered cash out to the borrower and does not have to be included in the “cash back to borrower at closing” calculation.

The lender may give the borrower a cash or cash-like (such as gift card) incentive that is not reflected on the HUD-1 as long as the amount of incentive does not exceed $500 and no repayment is required. Again, these types of incentives are not considered interested party contributions.

According to the Fannie Mae announcement, lenders may implement these policies immediately. Some lenders have their own incentive policies in place and may deliver loans with lender incentives that exceed the limits of this announcement if the applications are dated before May 1, 2013.

This is another positive move for the HARP program and a way to get more borrowers to refinance now that incentives can be used to pay closing costs. Homeowners who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009 are eligible for HARP 2.0. Overall, the cost of a HARP refinance is less than a traditional refinance and now just got even more affordable. There is no reason to spend a lot of time looking for a HARP lender to work with since the online form can be submitted and will return a response almost instantly. There are numerous HARP lenders available to work with individual situations through this process.

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