Roy Robbins
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The revised Home Affordable Refinance Program 3 has been introduced with a view to widen the reach of the HARP by eliminating the need for government sponsorship of mortgages through Freddie Mac and Fannie Mae.

With HARP 3 mortgage, the government also aims to bring into the fold those mortgages that were non-GSE funded. In the last decade such non-GSE funded mortgage programs proved cheaper and garnered 27.5% of the new mortgages in 2005. Therefore, with the latest proposed amendments, HARP 3 mortgage will do away with the GSE requirements and cover these homeowners as well.

A significant amendment in the HARP 3.0 requirements is that it seeks to correct the issues surrounding the liability of the banks as mandated in the refinance HARP 2.0. Many banks refused participation in the program due to the requirement of assuming the risk and paying the costs of the loans if Freddie Mac or Fannie Mae found an error in the lending process. This was a big legal risk for the banks and they imposed stricter measures to prevent absorbing losses. These investor overlays provided a safeguard for the banks and paved the way for the latest draft of the home Affordable Refinance Program 3. It is believed that with the revised HARP 3 mortgage, customers will benefit from a stronger financial standing.

The original Home Affordable Refinance Program was introduced in 2009 in order to provide solace to home owners who were desperately trying to save their homes after the near collapse of the housing market. However, the HARP requirements for eligibility disqualified those customers whose mortgages were not backed by either Fannie Mae or Freddie Mac. Also, another criterion that hurt the customers was the loan-to-value ratio being more than 80%. Add to this the reluctance of the banks to participate. Therefore, HARP was not able to provide the much needed relief to the customers as envisaged. The refinance HARP 2.0 that came into effect in 2012 with modified criteria, proved much more efficient than its predecessor and helped attract a larger number of people towards the program.

At present 20% of all finances are with refinance HARP 2.0. However, several other restrictions have prevented greater number of people from joining. The Home Affordable Refinance Program 3 aims to further simplify the HARP 3.0 requirements in order to make it more appealing for the customers as well as the participating banks.

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