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Previous Denials May Become This Year’s HARP Loan Approvals

By: | February 12th, 2013

The year 2012 was a very good year for HARP loans, both for homeowners and lenders. Many consumers took advantage of the low mortgage rates that were being offered and were able to save hundreds of dollars per month. Some chose shorter term loans which will help them eliminate the entire mortgage at a faster pace. Unfortunately, many homeowners were also turned away from being approved for a HARP refinance for one reason or another. The HARP program should continue its success during 2013 as previous denials may become this year’s HARP loan approvals.

HARP popularity grew in 2012 when extremely underwater homeowners, those with over 125% loan to value, were given access to the refinance program. Only loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009 are eligible for HARP. For many homeowners who had a tough time with expenses, possibly due to changes in employment status, not having a good mortgage payment history for six months is usually the reason for a HARP loan denial. Although HARP guidelines are not strict, making mortgage payments on time for six straight months is a necessity. For many consumers, the six month time period has passed and they are now ready to obtain a HARP refi.

Although HARP no longer has loan to value caps, some lenders have placed their own overlays and restrictions on the program. As home prices have increased, the loan to values for many HARP eligible homeowners may have changed putting them in a better position to obtain a HARP loan. The increase in home prices is also contributing to stabilizing the housing market. These factors may have an impact on lenders’ attitudes and restrictions when dealing with HARP refinances. Increasing home prices and ultimately lower loan to values are considered less risky than a free falling housing market.

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