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May 21st, 2011

Why can’t I refinance?!



rejectedWe get that question a lot! While sometimes it’s hard to understand why a certain reader was denied a refinance based on just the information they left in a blog comment or an email, other times, the reason is rather black and white.

While I may be able to discern why a given homeowner doesn’t qualify for a refinance, the answers borrowers receive from their servicers are often vague and incomplete. But just knowing whether or not you have mortgage insurance alone could unlock the key to why you have been denied.

Plain and simple: if you have mortgage insurance (MI), refinancing under the federal government’s Home Affordable Refinance Program (HARP) is going to be a lot more difficult than for those without it, explains HSH.com staff writer Gina Pogol in her article “Mortgage insurance puts roadblock on road to refinancing.”

MI was never supposed to complicate the refinancing process. “If you currently had MI and your loan-to-value (LTV) increases under your HARP refinance, you are not required to get a higher level of coverage for the new loan. If you currently do not have MI, but your LTV in the refinanced mortgage exceeds 80 percent, you don’t need to get mortgage insurance.”

Of course, nothing in life is simple. Here’s the reality of the situation:

The unfortunate reality is that underwater homeowners with MI cannot refinance as freely as those without MI.

What’s the sticking point? Though HARP officially allows refinancing at LTVs of up to 125 percent, the mortgage market doesn’t care what the program guidelines say. Any loans with LTVs higher than 105 percent have to be packaged for investors into different MBS that are considered higher-risk–meaning those loans are worth less to the lender.

Many mortgage lenders effectively refuse to let you refinance with them for anything higher than 105 percent. If you have MI coverage and your LTV is more than 105 percent, you are effectively cut off from other mortgage lenders for your refinance.

Is there anything you can do?

To learn more, be sure to continue reading Gina’s article “Mortgage insurance puts roadblock on road to refinancing.”

For more on HARP, be sure to read:

Why is it so hard to be approved for a HARP refinance?

Understanding HARP’s stumbling blocks will increase your success

Are the wrong borrowers refinancing through HARP?

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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