HARP Insurance FAQs
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The Home Affordable Refinance Program (HARP) is a program that helps homeowners refinance homes that are underwater. The program began in 2009 during the housing crisis when a growing number of borrowers couldn’t refinance because of decreasing home values. “The idea was to get people lower interest rates, which would help them meet their loan obligations,” said Tendayi Kapfidze, chief economist at LendingTree.
Fast-forward to present day: HARP has helped more than 3 million people refinance their homes and continues to be an affordable option for borrowers who have little to no equity. Important note: The deadline to get a HARP refinance is Dec. 31, 2018. If you’re interested in using the program, it’s imperative you start shopping for options sooner than later. You can read more about the program and its eligibility requirements here.
“[Interest] rates are a little bit higher now, but there are still many people who are eligible for a HARP refinance,” said Kapfidze. According to CoreLogic, 2.2 million homes (4.3% of mortgaged residential properties) are still underwater after the crisis, as of the second quarter of 2018. If you’re underwater or own a home with little equity, Kapfidze suggests at least looking into HARP to see if it can benefit you. When considering the HARP, many homeowners wonder how mortgage insurance will factor into the refinance. Here’s what you need to know:
HARP insurance frequently asked questions
- I have mortgage insurance. What happens to it?
- What happens to the mortgage insurance premiums (MIP) for FHA loans?
- What’s the cost?
- I don’t have mortgage insurance — will I have to add it?
- Do I need to shop for new mortgage insurance coverage?
- What if I’m denied?
- Is HARP right for me?
I have mortgage insurance. What happens to it?
The mortgage insurance is added to the HARP refinance. “It’s basically transferring the existing certificate over into the new loan and there’s no interruption,” said Cristina Zorrilla, assistant vice president of mortgage pricing and investor relationships at Navy Federal Credit Union.
The mortgage insurance percentage should be the same for your old and new loan, according to Fannie Mae. Mortgage insurance sticks around until it’s canceled or terminated. Here are three scenarios in which mortgage insurance can be removed:
- You can ask to have it canceled when your loan balance decreases to 80% of the original loan amount.
- It can automatically cancel when your loan balance reaches 78% of the original loan amount.
- It may cancel automatically when your loan term reaches the midpoint of the amortization schedule.
The same mortgage insurance provider doesn’t have to be used on your HARP refinance. However, according to Fannie Mae, using the same mortgage provider will likely “provide the lowest cost and broadest eligibility since that insurer already has the risk.”
What happens to the mortgage insurance premiums (MIP) for FHA loans?
The HARP refinance isn’t for borrowers who have FHA loans. FHA loans are backed by the Federal Housing Administration and do not qualify. The HARP refinance is for loans that are owned by Fannie Mae and Freddie Mac. If you need to refinance an FHA loan, the FHA streamline refinance is a product to look into instead.
What’s the cost?
Fannie Mae states that mortgage insurance companies are allowed to charge a reasonable fee for insurance adjustments. If there is a fee, it may be rolled into your new loan. There are also closing costs to consider that come with any other refinance. You may be able to catch a break on costs with certain lenders. For example, Navy Federal Credit Union transfers mortgage insurance without tacking on a fee and may even roll closing costs into the loan, according to Zorrilla.
I don’t have mortgage insurance — will I have to add it?
If you don’t have mortgage insurance on your existing home loan, you will not need mortgage insurance for the refinance even if your LTV is higher than 80%.
If you put down less than 20% on your existing home loan, you should still check to see if you have lender-paid insurance. Lender-paid insurance hasn’t been paid by you but it still gets transferred to the new loan. The lender can choose to continue the lender-paid insurance on the HARP refinance or it can be converted into borrower-paid insurance. Navy Federal Credit Union is an example of a lender that offers lender-paid insurance and may continue lender-paid insurance on the HARP refinance.
Do I need to shop for new mortgage insurance coverage?
The mortgage insurance certificate from your existing loan should be transferred or replaced with similar coverage during the mortgage process. You won’t be searching for a new policy on your own because the lender will take care of it.
Working with your existing loan servicer on the HARP refinance could make the process easier. The servicer already has the details of your loan and mortgage insurance on file. With that said, it may still be a good idea to shop around to see what rates and terms are offered by other lenders. The goal of a refinance is to find the option with the most savings.
What if I’m denied?
Don’t give up. Some lenders may have overlays which cause your application to get denied. Overlays are stricter requirements (credit score, DTI, etc.) that lenders can tack on beyond what a mortgage program requires.
Another instance that could cause trouble is if your existing mortgage insurance isn’t able to transfer and you’re unable to secure new insurance with a certain lender. However, during the height of HARP refinance around 2009 when the program was instated, mortgage insurance companies were cooperative, Zorrilla said. Still, if one lender denies you, but you meet the basic eligibility requirements explained here, shop around. You may be able to find a lender and mortgage insurer that’s able to work with you.
Is HARP right for me?
A HARP refinance may be a good move financially if you have an unstable mortgage (interest-only or adjustable-rate) or you have an interest rate that’s not competitive. A fixed-rate mortgage can bring some stability to your payments, and a lower interest rate can decrease your costs.
HARP isn’t a product you can use as a last resort if you’re behind on mortgage payments. It’s for borrowers who have a record of consistent payments but can’t refinance with other products because they have minimal equity in the home. The Home Affordable Modification Program (HAMP) is one to consider instead if you’re delinquent or facing foreclosure. HAMP isn’t a refinance program. Instead, it reduces your existing mortgage payment to make it manageable.
Time is of the essence for the HARP refinance
Don’t drag your feet if you’re considering a refinance, because options are limited for homeowners with underwater properties. The HARP option expires on Dec. 31, 2018. Get in contact with your lender to find out if they offer the refinance and shop around with a few other lenders to get an idea of what’s available.