Posted by Jonathan J. Miller -Monday, October 24, 2011, 10:50 AM
The current HARP program is being enhanced by the GSEs led by their regulator FHFA to help more people to refinance to slow the rate of default and get people back into the economy:
The new program enhancements address several other key aspects of HARP including:
- Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
- Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac; * Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
- Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
- Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.
HARP (Home Affordable Refinance Program) was created in 2009 to help borrowers take advantage of low mortgage rates even if they had no equity in their homes. It was not effective so the restrictions have been expanded.
Of course this provides no help to borrowers with jumbo (non-conformining mortgages) in high cost housing markets who have have the same issue. I find it wildly unfair that there continues to be a bias to high cost housing markets effectively keeping a large number of middle class borrowers out of this program.
One of the big problems with HARP as initially set up was that the lenders were resistant to participating because of “buyback risk” if original underwriting was flawed (it could be argued that nearly ALL underwriting was flawed during the boom).
Under changes to be announced on Monday, banks will be largely shielded from the “buy back” risk on HARP mortgages, and they’ll only have to verify that borrowers meet a more tailored set of eligibility rules: that they’ve made their last six payments and have no more than one missed payment in the last year and that they have a job or another source of regular income. Those changes are a pre-requisite for “any game-changing refinance activity,” says Mahesh Swaminathan, senior mortgage strategist at Credit Suisse.
Even bad AMC appraisers will get screwed this time
I find it fascinating that appraisals are not required “where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises.” This is LOL on so many levels. Fannie Mae and the NY AG Cuomo’s HVCC agreement back in 2009 unintentionally destroyed the appraisal industry by enabling appraisal management companies to proliferate. Most AMC’s have some sort of AVM capability and it their appraisals are poor, you can only imagine how reliable their AVMs are.
There are no reliable AVMs I am aware of, the quality of appraisers working for AMCs is very poor, most AMCs have AVMs and AMC’s dominate the mortgage appraiser space. Banks will likely choose only based on cost since that’s all they ever do and both valuation services, AMC appraisers and AVMs provide crappy reliability.
An AVM costs something like $7 today and a bank appraiser for an AMC is $200 (50% of market rate). Since both stink, banks will go with the cheaper version.
Appraisal Moral Lowball fees circumvent providing quality so most clients see it as the only important commodity a vendor offers. This applies to all businesses – we’re not just talking’ appraisal industry here.
There is no loyalty to a vendor if their only selling point is…
So where the hell is the Appraisal Institute? Oh wait, I know, supporting green initiatives and developing courses on “green valuation”. Not very useful if the residential appraisal industry is no longer around.