Harp 2.0 Refinance with Wells Fargo
I recently started a HARP 2.0 Refinance with Wells Fargo. Before I started the refinance process I did some research online and found that a lot of people are being misinformed about the process and a lot more people have questions that are going unanswered. Sharing my story will hopefully answer some of those questions.
First of all it is important to know that everyone’s situation is different. If you situation is not exactly the same as mine then your experience in the HARP refinance will probably be different. I own a property that according the the Freddie Mac automated appraisal is worth $259,000. I currently owe $223,000 so I am at an LTV (Loan to Value) of 86% according to Wells Fargo. I purchased the home for quite a bit more than it appraised and my PMI was just about to come off, but at the time of the refinance I did have PMI on the loan. The original mortgage was through Wells Fargo and sold to Freddie Mac prior to the June 1st 2009 deadline to qualify for HARP, I bought the home in 2008. Wells fargo used my middle credit score which was 731. I was told by Wells Fargo that since they are the original servicer of the loan they would only verify my two year employment history and they would be using a stated income for underwriting purposes. I have never had a late payment on the home and was at an interest rate of 5.625% going down to a 4% rate because this is now an investment/rental property.
I have seen a lot of people claiming that Wells Fargo is declining their HARP application because they pay on time so why would the bank want to give you a lower rate for an on time customer and make less money? This is antirely UNTRUE! While you may be paying on time, if you are at 80% LTV or higher you still carry a significant risk of default with the lender. By allowing you into the HARP program they not only extend your loan, in my case adding 5 years, but they eliminate all risk of default since the government has guaranteed these HARP loans. Think about it this way, if I am making $5000 per month at work and I get paid on time every month I am happy. There is the risk that I could be laid off which would mean I no longer have that $5000 per month and I may be losing money due to my monthly debt obligations. If you were offered a job paying $4,500 per month that guaranteed you would never be laid off, is that really a bad deal? Absolutely not, and it is no different for the banks.
The biggest setback to HARP 2.0 loans is the amount of time it takes for closing. Originally these loans closed in 60 days but there are so many applications out there it is now a 90 day process or longer. I have gone through the extremely limited underwriting process and now I am just sitting around waiting for everything to finish. I am self employed and have been for two years and Wells Fargo did not ask for my tax returns or anything else aside from a letter from my accountant stating I have been self employed the last two years.
In the interest of full disclosure, the mortgage rep I was working with said Wells Fargo will randomly ask for tax returns which is why they have you sign a form 4506T during the application process. The rep did say that everyone they requested returns on was denied, so if you do try a Wells Fargo HARP refinance in a Wells to Wells situation there is a chance they will verify your income and deny you. For me, the income verification isn’t a big deal because I rent the home out and positive cash flow, plus I have only a very small amount of personal debt. A vehicle financed at 0% interest costing $400 per month and a $300 per month student loan payment. The home I currently live in is finance by my wife because we bought it before I had a full two years of self employment so I was not able to be on the loan.
Even if you get denied for HARP refinance, or any other refinance for that matter, you are not out of luck. With the fiscal cliff sure to hit I wouldn’t be surprised to see interest rates drop even lower and HARP 3 to have even more relaxed guidelines to make your deal even sweeter at some point in 2013. If they agree to some kind of fiscal cliff deal I don’t think the refinancing options will improve much, but it looks like they won’t reach a deal so refinancing in the second half of 2013 should be a great deal.