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Barb Lanis

Why won't my Lender do a HARP refinance with BPMI or LPMI?

Thursday, January 3, 2013 - Article by: Barb Lanis - The Federal Savings Bank - Message

Why won't my Lender do a HARP refinance with LPMI?

The 2012 revised HARP refinance program (which we in the mortgage business affectionately call HARP 2.0), brought many positive enhancements for borrowers. Initially, the HARP program had limitations and left many borrowers out in the cold with no way to refinance.

Overall, it was a great program, but it became clear that further efforts needed to be made to enhance the program to include more borrowers.

The enhancements with HARP 2.0 as it relates to BPMI/LPMI are very straightforward:

Borrowers who currently have BPMI or LPMI can now refinance and have their mortgage insurance certificate transferred to their new loan - at the same premium rate of their previous loan.

  • BPMI (Borrower Paid Mortgage Insurance) is mortgage insurance that is paid monthly, by you, as part of your monthly payment. You will see this on your monthly statement from your servicer.
  • LPMI (Lender Paid Mortgage Insurance) is mortgage insurance that was paid Up-Front in a Lump Sum by your lender when you closed on the loan.
  • LPMI and Paid by your Lender. Sometimes, lenders also made a variation to the above and the borrower actually had BPMI, but the lender/servicer paid it monthly on their behalf. In this case, you will not see a premium amount on the statement. Many borrowers did not even know they had this type of mortgage insurance.

Why won't my Lender do this type of HARP Refinance?

Although Fannie/Freddie now allows HARP refinances with BPMI and LPMI, there are many lenders that have made the business decision that they will not do them. Perhaps it's that tiny extra step to have the MI Certificate transferred to the new loan. Keep in mind that even though Fannie/Freddie allow for certain types of loans to qualify for HARP, it does not mean that they can compel lenders to do them.

What To Do and What You Need To Know if your Lender/Servicer will not refinance a loan with BPMI or LPMI

  • It's up to you to find a lender who will. You should immediately start your conversation with your Loan Officer informing them of this element of your scenario. This will save everyone a great deal of time.
  • Do not allow your credit report to be run many times if you inquire with several lenders. The unintended consequence is that your credit score may drop dramatically, putting you in a lesser tier where your rate may not be as favorable. I have seen borrowers with 10-12 credit inquiries on their report - all due to them seeking a lender who does the BPMI/LPMI.
  • Once you have found a lender who can do the loan, the process for refinance is the same as any other, with the exception of one small extra step - Your lender will simply need to request that the MI Certificate be transferred to the new loan. There is nothing you need to do - it will be handled for you.
  • Refinancing with BPMI/LPMI should not significantly increase the time it will take to refinance. In general, the transfer of the MI Certificate only takes an additional few days.

If you currently have BPMI, then the monthly premium amount will be the same as it was with the old loan. This is a good thing because current MI premiums are much higher than those from 5-6 ago!

If you currently have LPMI, the MI Certificate is simply transferred as it had already been paid in full with your last loan.

If you have the variation where you have LPMI, but your Lender/Servicer is paying it monthly on your behalf, you will now a have monthly mortgage insurance premium included in your payment. Again, it will be at the old (and lower) premium that you originally had. Generally, the amount is so minimal that it pales in comparison to the savings obtained by dropping the interest rate.

Reminder, make certain that you tell your Loan Officer up front that you have, or think you have, BPMI or LPMI on your current loan.

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