HARP 2.0

Written By: Bonnie Wilt-Hild

I could be wrong but I don’t think I am when I say this program is a bad idea. To substantiate that statement I will quote one that I read on a LinkedIn post a couple days whereas one blogger posted the question “Is HARP 2.0 real, is anyone really closing them?” just to be answered by another blogger who posted, “yes, laughing all the way to the bank”. The sad truth is that I am sure that he is, unfortunately.

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I read a bit of the underwriting criteria where the program is concerned when a colleague of mine mentioned his uncertainty about the program and I have to tell you, it was like taking a stroll down memory lane, the only exception is everyone did that nonsense without permission until 2007 when the principal stopped looking the other way. This time around however, the industry has basically been given permission to conduct business in this manner, with less than qualified borrowers under the pretense that they will be placing them in affordable mortgage products. This guidance makes comments like “by ensuring that the GSEs do not require the HARP originator to take responsibility for the quality of the loan that is being refinanced, it will expand the universe of responsible borrowers to whom they offer the refinancing option”, or “we look forward to working with Congress to further reduce the barriers to refinancing under HARP 2.0, including easing costs associated with mortgages that have greater equity than 80%, easing underwriting standards, and easing appraisal requirements.” The verbiage in these statements is a complete go ahead for the less than scrupulous lenders and in my opinion, a nightmare for underwriters who have just recently helped their employers and staff wrap their heads around the dangers of underwriting without due diligence.

The main argument against the theory of easing underwriting and appraisal requirements, aside from the huge mess it created in 2007 is the take on the “responsible borrower”. Let’s keep in mind everyone, this program is designed for those borrowers who did not qualify for agency or non agency programs in the first place, in other words, borrowers who were placed in subprime mortgage programs because their credit or overall financial profile was not sufficient so that they could be placed in an A paper program. Further and if my memory serves me, I don’t think underwriting criteria where subprime mortgages were concerned took in not consideration things like acceptable credit histories or if or not the reasons for delinquent credit obligations were the result of financial mismanagement of financial neglect. Granted, there were some of these borrowers who were misplaced in these programs but for the large part, many of the borrowers who obtained subprime loans did so because it was their last option. Those subprime loans in many instances were made to individuals who did stated income loans because they did not qualify for the loan amount for which they were applying and the borrowers who were currently in foreclosure but because they had sufficient equity were able to refinance themselves out of the foreclosure and say what you want but in my opinion those people were not responsible borrowers. So here we are with a new program designed to make it easier to refinance into a paper programs with a lower interest rate while not even having to meet the criteria of qualifying ratios? That is correct guidance on this program actually states that “To determine a borrower's eligibility, a lender need only confirm that the borrower is employed,” seriously who cares if they can make the payment.

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In closing I simply want to state that I strongly disagree with the offering of this program, it allows those borrowers to simply refinance into a lower interest rate, pay less at closing and skip the underwriting scrutiny that other borrowers, responsible borrowers, are subject too. Additionally, it further puts at risk a mortgage industry which is still working diligently to dig itself out of the financial mayhem of the past five years, a mess that was caused by the very same underwriting standards or lack thereof, proposed by this program. In the news release shared on the HUD’s website, the program was further discussed stating at one point “the President’s plan includes…” as far as I’m concerned, if this is the president’s plan then he should insure these loans and leave HUD out of it so that there is still a mutual mortgage insurance fund for generations to come.



About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.