What does Expanded Approval mean for HARP?

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,100
181
63
San Diego, California
www.loansreduced.com
Hi Everyone,
Many people are just becoming aware of the government program HARP which allows the Fannie Mae & Freddie Mac backed clients the ability to refinance and take advantage of the extremely low interest rates today has to offer. Some of the people that have applied for this program have been denied because they received “Expanded Approval†feedback. I’m here to explain what that means!

Fannie Mae and Freddie Mac both have different Automated Underwriting Systems (AUS) which determine a borrowers eligibility for the program and also if they’re able to obtain an appraisal waiver. Yes this means that you MAY have to pay for an appraisal depending on where your property is located and if there are recent comparable sales for the system to base a value upon. Once the file is run through the system, as long as the information provided is accurate you should have no problems during the refinance transaction.

Some have been told, I’m sorry you’re denied due to Expanded Approval feedback. Here are some reasons below why that may have occurred and you should discuss with the loan officer you’re working with (hopefully me) why that feedback occurred.

  1. Total Expense Ratio – Means you may have a high back end debt to income ratio (all liabilities including mortgage vs gross income).
  2. Credit Score – Low credit scores can add additional risk
  3. Recent Account Openings Too Short – I usually see this if a borrower applies and receives multiple new credit cards, new car…etc.
  4. Credit Profile – Something in your profile in the past caused the higher risk, whether it’s late payments, missed payments or collections.
  5. High Loan to Value – Higher loan to value loans are riskier products to offer, if you as the borrower have additional assets to offset some of the negative equity it may significantly help your chances of obtaining an approval.

These are a few examples, depending on your scenario if you have been denied it should tell you why. With finding out WHY the file was denied, a good loan officer will tell you what it’s going to take to make it work. Maybe you need to pay off some liabilities or work with your Rental Income on your Schedule E (if you own more than one home). Maybe gift funds from a family member will help get you approved for the program. Even changing the term of the new loan from 30 years to 25 helps with the automated underwriting system.
Now for the GOOD news!

I have been working with this program since the very beginning of its release and very familiar with the progress it has made. The system was recently updated over the past week which has resulted in MANY, MANY more loans being approved. Automated Underwriting used to evaluate not only the borrowers risk of future default but also the properties risk. It would take the statistical data in the area, if many properties in your area similar to yours have foreclosed you may end up being denied the refinance. I had borrowers that were being denied that made over 100K a year, have over a 760 FICO and perfect credit profile just because many of their neighbors walked away from their homes.

Now with the recent update, the system is now analyzing the BORROWERS future risk of default rather than the property. If the borrower has a strong credit profile, no missed mortgage payments and a good debt ratio you can almost count on being approved for the program. This is a big change for the program and has caused me to go back to many of our valuable LoanSafe members and ask if it’s ok that I give the program another shot. Since that time I have had about a 90% success ratio of approving these new loans that were denied in the past.
I know many members have been frustrated having difficulty being approved for the program but that seems to have changed drastically recently. If you have been denied in the past and would like to re-apply, I would be happy to help.
As always, I’ll keep our LoanSafe members up to speed with the progress of any new programs implemented to help our underwater borrowers. Have a happy, healthy and safe Veterans day!