Freddie Releasing HARP 3.0 Automated Underwriter - Expects Increased Approvals; Major Stumbling Blocks Remain

HARP production exceeded 180,000 transactions during the first quarter, nearly doubling from the fourth quarter.

But few deeply underwater borrowers are actually benefiting from the program, while some small lenders are receiving caution ratings and larger lenders are being overwhelmed with inquiries.

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In response to complaints from lenders, Freddie Mac this week will undertake a "fine-tuning" of its underwriting process, according to Freddie Mac spokesman Brad German. Specifics of how the automated underwriting models will be altered aren't being disclosed, even to lenders, but some homeowners who have been turned down for the program may now qualify, he said.

"It will be a noticeable, positive change for the homeowner," German said. "It will help increase the number of borrowers who can refinance under HARP and take advantage of today's rates."

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Other issues remain, however.

The nation's largest servicers say they are seeing overwhelming demand -- Bank of America alone has received 30,000 applications in the past three months -- but most have limited the program to existing customers. Noncustomers, if they are able to apply, face more stringent requirements.

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[For example,] Bridgeview Bank Mortgage Co. is fielding 15 to 20 calls a day from consumers interested in the program, and of the 100 or so who have submitted applications, just one is headed toward approval. Consumers "are so frustrated, they are so angry," said Christine Leyden, an executive vice president.

A customer at Devon Bank in Chicago looked great on paper, and seemed the perfect candidate for a program that could drop his mortgage rate from 5.75 percent to 4.125 percent. But because the customer had already started the application process elsewhere, there were inquiries on his credit profile and the automated underwriting process gave the application a "caution" rating