Credit enhancement caused my HARP refi to be denied. I have excellent credit, good income...what's the deal?

Credit Enhancements usually have to do with the mortgage insurance.... on certain loans where the lender, for what ever reason, never sold the loan initially to Freddie or Fannie, but rather held the loan in their portfolio, and then months/years later decided to sell off the loan, they had to get "Pool Insurance".. which is an insurance certificate for a group of loans, where if the loan was initially sold from the beginning, it would have had an individual certificate.. With individual certificates, they can be transferred, however, in group or "Pool Certificate", you cannot remove one loan from the pool and reinsure it.... so because of this type of credit enhancement, your loan is denied.. I have had multiple HARP refi's with this "Code 64" or "Credit Enhancements", and have yet to get one approved.. Maybe HARP 3.0 if it ever develops.. stay tuned!!! .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Let me take a stab in the dark here... was an old collection paid off? Please specify what kind of credit enhancement you received, then this forum can help you best. :)

Wow. Tough question, and harder to explain in a simple answer. My commentary will have to be a somewhat complicated answer to what seems like should be a simple question. Unfortunately, there are a lot of moving parts and potential reasons... anything from possibly being something specific to your lender, or some type of characteristic of your existing loan and how it was originated, sold and serviced in the past, or your particular loan application characteristics now. Without knowing the details on your existing loan and having the Automated Underwriting Approval in hand that you were denied with... AND knowing what guidelines your lender is adhering to, it is a bit difficult to narrow it down for sure without more details. These could be some possible reasons however: One reason could be that the lender won't originate any HARP loans that had Lender Paid Mortgage Insurance on them. This is a form of MI where the lender self-insured the loan against losses over 80% loan to value. (The borrowers usually paid a slightly higher interest rate for those loans, but didn't know that they had MI on their loan. Probably hidden in the fine print on a disclosure somewhere.) The credit enhancement term is thrown around loosely by many lenders when it's their own guideline overlays that don't allow them to originate the loan. (For instance, some lenders don't go above 125% loan to value, where we have an unlimited cap on LTV.) We also do allow loans where there was LPMI, but require the borrower to get a new MI certificate to replace it. That can sometimes reduce the monthly payment savings benefit on the loan because the borrower now has to pay an MI payment themselves. Another possibility is this: There are also a small number of loans that Fannie Mae purchased where "credit enhancements" were added to the loans AFTER they were closed. These various credit enhancements were required when Fannie Mae finally purchased the loan... in order to have that loan meet Fannie Mae's minimum loan requirements and be able to be added into their portfolio of loans and thus securitizing the Mortgage Backed Securities. (Enough Lender-speak" on that answer?) Plain english? Certain loans didn't fit their box and they wouldn't buy them. Instead of sitting on the loan, the lender / servicer had to add additional coverage or other things like full recourse to offset the risk for Fannie Mae to buy it. One such enhancement could have possibly been what's called Lender Paid Pool Insurance. (LPPI). This LPPI is added afterwards with a mortgage insurance policy where the servicing company lender essentially self-insures the loan against losses. If you want a reference on this, here is a Fannie Mae DU Refi Plus (Fannie Mae's HARP program) FAQ document recently produced: https://www.fanniemae.com/content/faq/harp-du-refi-plus-faqs.pdf This discusses some of the reasons why loans with Credit Enhancements are not DU Refi Plus eligible. Even with LPPI, many loans are still eligible for HARP and it doesn't automatically mean a denial. However, if the automated underwriting approval doesn't come back with an "Approve / Eligible" finding, or has what's called an "Expanded Level Approval" such as EA1, many lenders may not be willing to originate the loans due to their own underwriting guideline overlays. Files requiring "Manual Underwriting" may still not be eligible for HARP under these circumstances as well. I will say that there were recently new revisions being put into the Automated Underwriting Systems that might allow lenders to get approvals on the loans where in the past they have not been successful. I recommend discussing it in detail with another lender who assures you that they don't have any "overlays" to the Fannie Mae underwriting guidelines and will sell the loan directly to Fannie Mae, and most likely service the loan themselves after closing. You have the best chance for success for your situation I believe. My branch isn't licensed in OR, but we do have branches there. If you need a referral I'm happy to make an introduction.

Need more info, but if it was denied at one lender, doesn't mean you can't go to another lender. Find out the true reason and then I suggest you find a lender that can sell their HARP loans to Fannie Mae Direct. The rate is a little higher but you don't have the risk overlays that lenders have.

As others mentioned......please provide more info.

What is a "credit enhancement?"

What type of credit enhancement did you do?

Definitely need more information. Feel free to email me your scenario. I am licensed in OR & WA and be happy to assist you.

Check with another lender, not all have the same "credit enhancements" (also called overlay's). Is your current loan with Fannie or Freddie?

Unclear on your question.

Hello, Sorry to hear about your situation. Just dealt with a client who also had a "Credit Enhancement" when Freddie Mac purchased their loan, and due to that, they are also unable to use HARP program. We were unable to get an explanation from Freddie Mac as to what the "Credit Enhancement" was, what it meant, or if they allowed any exceptions.

Some clarification on what "Credit Enhancement" is in this context. Contrary to some answers here, it doesn't have anything to do with what the client's credit report says. It has to do with the quality of the loan package has when it's being sold to Fannie Mae and put into a "pool" of loans that are backed by MBS. (Mortgage Backed Securities). If the loan doesn't meet the criteria, there are "credit enhancements required, usually for loans above 80% loan to value such as mortgage insurance or requiring that the lender agreeing to buy the loan back if it defaults. See section under "Credit Risk": http://www.sec.gov/comments/s7-38-11/s73811-16.pdf