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HARP Rep and Warrant Relief Could Boost High LTV Refis

DEC 28, 2012 1:01pm ET
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HARP loans delivered to Fannie Mae and Freddie Mac after Jan. 1 will come under new representation-and-warranty standards that could give the refinancing program a boost in 2013.

The GSE regulator promulgated the new R&W policy on Home Affordable Refinancing Program loans back in September with a Jan. 1 effective date.

HARP refinancings will be “eligible for rep-and-warranty relief after an acceptable payment history of only 12 months following the acquisition date,” the FHFA said in a Sept. 11 statement.

Quicken Loans chief economist Bob Walters said the 12-month sunset on rep-and-warranty liability, coupled with some other changes Fannie and Freddie have implemented will allow lenders to lift some of their overlays.

“It had the desired effect with us,” he told NMN.

Quicken Loans has raised its loan-to-value cap on HARP loans up to 200% from 125%.

“It was a direct result of those changes and our growing confidence in the reps and warrants that we were taking on those loans,” Walters said in interview.

The chief economist also credited the GSEs’ decision to forego reps and warrants on appraisals as a contributing factor in raising the cap.

Lenders don’t have to rep and warrant the accuracy of the appraisal on HARP loans. So the lender cannot be held responsible for the marketability or condition of the property on HARP loans if the borrower defaults. The appraisal R&W policy was implemented back in September.

Fannie and Freddie seller/servicers have originated 790,600 HARP loans during the first 10 months of this year. Over 160,000 of those refinancings involve underwater loans with LTVs greater than 125%.

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