28 Dec
2011

Discussion With a Mortgage Broker

Today I called a mortgage broker (1 of  12 personal recommendations), and talked at length about refinance, HARP, HARP 2 and lending practices in general. I told him that Bank of America offered me 4.5%, and wondered, is that good enough? Could he (or another lender) do better?

The answer was not a simple one, but it was informative. Here are some of the highlights:

Qualifications Vary From Official HARP Guidelines

All lenders have “overlays,” additional rules that they impose. In other words, each lender can have their own subset of more guidelines that are more restrictive than the official HARP guidelines released by the government.

Automated Underwriting Appraisals Available Mid-March, 2012

Fannie Mae appraisals via automated underwriting will be available mid-March, 2012.

This is significant because when I went to US Bank to ask about refinance through the HARP 2 program, they told me I would need an appraisal and that it would need to be at least $140,000 in order to qualify for the program. What US Bank didn’t tell me is why, and what Mortgage Broker #1 explained was two-fold:

  • no matter what the program says, lenders can request an appraisal
  • Fannie Mae appraisals won’t be available to other lenders until mid-March, so all lenders (unless it is the current loan holder) will require an appraisal until mid-March, 2012 (approximately)

Pricing on HARP 2 Is Not Available Until Mid-March, 2012

Pricing is not available for HARP 2 yet, so no one knows what the pricing will be. Press releases say it’s supposed to be cheaper, but it’s impossible to know and these programs are notorious for key guideline shifts between the official release (November 15, 2011), release to lenders (November 28, 2011) and actual implementation by the lender (originally thought to be December, 2012, but now estimated at mid-March, 2012).

“We’re assuming that HARP 2 won’t require appraisals as they are saying, but it could fold out with footnotes and augmentation.”
– The Mortgage Broker

If you have to get an appraisal, they are good for 90 days. They are not accessible to any one else, except the lender you share them with. (So if you get an appraisal and it indicates that your home is not as underwater as you think it should be, you can go to another lender who does not require an appraisal, and try to reapply.)

Watch for Gotchas

Closing Costs

Sometimes at closing you’ll be asked to pay as much as $2800  to reestablish escrow. Even if all the closing costs are rolled in. You should ask your lender about this, and be prepared to write a check, just in case.

Lengthy Resubordination Process

Some lenders (ahem, US Bank) take an unreasonably long time to resubordinate 2nd mortgages. US Bank is known to be the worst, taking as much as 3-4 weeks. The 1st mortgage has to be approved before resubordination and if your interest rate is locked in at 60 days, but the 2nd mortgage lender takes 61 to resubordinate, you can lose your locked interest rate.

Surprise Appraisal

Your 2nd mortgage lender can force you to do an appraisal. If you get an appraisal that does not accurately represent the value of your home, you can lose the HARP refinance, and you will have to pay for that appraisal. (Which is $425 through US Bank, higher than most.)

Alex Stenback is a Mortgage Broker in Minnesota. His blog Behind the Mortgage is as informative and thorough as he is conversationally.

1 Comment

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