When the expanded guidelines of the Home Affordable Refinance Program (aka HARP 2) were released late last year, they announced that loan to value (LTV) restrictions were being removed. It all sounds very simple however, no big surprise here, there’s a little more to it.
Fannie Mae and Freddie Mac each have their own automated valuation systems that determine their estimated value of a property. With both Fannie and Freddie, once an application is complete, the loan is ran through their automated underwriting systems (AUS) which will then determine if the estimated value of the property used is acceptable and if an appraisal waiver will be allowed. As their systems are automated (computer programs) you cannot contest the value or submit improvements you’ve made to the home. If you do not want to use the value provided, you can opt to have an appraisal.
Freddie Mac’s valuation program that is used with HARP 2 is Home Value Explorer (HVE). Not only does it list a specific value of the property, it also offers data to support how confident they are with the estimated value of the property. Some lenders have underwriting overlays with requirements that the Forecast Standard Deviation may be in addition to the HVE findings. NOTE: I am receiving more approvals with appraisals waived from Freddie Mac Relief Mortgages – Open Access – HARP 2 refinances!
Fannie Mae’s appraisal waiver system has been a bit of guessing game. Fannie has simply issued a response pretty much saying “we accept this value” with no other data provided for what they’re using for the value. This is all about to change. Over last weekend in April, Fannie Mae will start issuing this response:
Based on the standardized address, Desktop Underwriter estimates the value of the property at $<estimated value>. This estimated value was developed by internal proprietary models to help determine eligibility for a DU Refi Plus property fieldwork waiver. It is not the result of an appraisal, nor was it developed by a state licensed or certified appraiser. This estimate is intended to be used solely by the lender to underwrite the refinance of the borrower’s mortgage loan.
If a refinance receives the above response from Fannie Mae for a DU Plus HARP refi, they can either use the value provided, use their own estimated value if they have received an “eligible for appraisal response, or obtain an appraisal. NOTE: Some lenders may have different underwriting requirements (overlays) for how to treat Fannie’s new value system.
It’s also possible with Fannie Mae or Freddie Mac to not provide an estimated value of a property due to lack of available data to determine a value. In which case, an appraisal waiver is not available and an appraisal will be required.
Right now you might be scratching your head and be thinking “what a second, I thought HARP 2 eliminated loan to values?” Keep in mind that these loans are still risk based underwritten. Not every HARP 2.0 refinance will qualify to have the appraisal waived.
The following properties may be eligible for an appraisal waiver with a HARP 2.0 refinance:
- 1 unit properties for Fannie Mae DU Plus
- 1-2 unit properties for Freddie Mac Relief Mortgage – Open Access
- Primary residences, second homes and investment properties
- loan to values greater than 80%
- detached or attached properties (condominiums/townhomes)
Some HARP 2.0 transactions are still limited to a maximum loan to value of 105%:
- Loan terms greater than 30 year fixed;
- Adjustable rate mortgages.
If you have an existing second mortgage or home equity line of credit and receive an appraisal waiver, it’s possible that the second mortgage lien holder may require an appraisal. So far (knock on wood) the second lien holders we’ve submitted subordination request to without an appraisal have been cooperative.
HARP 2 refinances, as I’ve written before, can sometimes seem like throwing spaghetti on the wall to see what sticks. It is unknown if your appraisal is going to be waived until we have your complete loan application and submit your scenario to Freddie Mac or Fannie Mae’s automated underwriting system. The good news is that once I have your application, submitting your loan and learning the response is fairly quick. And more and more applications are receiving an appraisal waiver.
Don’t forget, banks and lenders have their own restrictions underwriting overlays they may add to Fannie Mae and Freddie Mac guidelines, including loan to value.
If your home is located anywhere in Washington State, where I am licensed, I’m happy to help you with your mortgage. Click here to apply.
I am required to have the language below if I am soliciting your Home Affordable Refi for your home in Washington…and yes, I would love to help you with your HARP (or any) refinance:
Freddie Mac and Fannie Mae have adopted changes to the Home Affordable Refinance program (HARP) and you may be eligible to take advantages of these changes.
If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.
You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites: