Profile picture for buckthorne

What is "credit enhancement?"

When a lender submitted my HARP refi to Freddie Mac, I was told that I was ineligible for the following reason:

Volume 1, B24 .2 (a) : "If the Mortgage being refinanced was sold to Freddie Mac with recourse, indemnification, Mortgage pool insurance or another negotiated credit enhancement, it is ineligible for refinancing as a Relief Refinance Mortgage ? Open Access.").

Freddie Mac has no explanation for this "credit enhancement." I do not have mortgage insurance on my current loan, have never had mortgage insurance. I was told to contact the original loan servicer, which was Taylor Bean and Whitaker, who filed for bankruptcy and closed their call center in March. How is it that Freddie Mac can deem me ineligible for something they can't even explain? Thanks.
  • April 28 2010 - US
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Answers (26)

I believe that would apply to a 97% or 100% conventional loan that was classified as something like " my community " etc. Since you never had MI, did you put down 20% or more when you purchased?
  • April 28 2010
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My Community loans were Fannie Mae's but Freddie Mac had the same products, 1 name was Home Possible. If it was a CRA loan, then that is what they are talking about. I remember 1 loan that I referred to as the zip code loan, it was 100% ltv and no mortgage insurance. It was only available in certain zip codes ( referred to as underserved markets). Others had certain restrictions like income caps. What % was your down payment?
  • April 28 2010
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Profile picture for buckthorne
Thank you for your response. I refinanced out of an ARM 3 years ago. My LTV was 79% at the time. Freddie Mac says that my loan may have been pooled with other mortgages that carried mortgage insurance. I don't understand how this becomes a problem for me and I cannot get an adequate explanation.
  • April 29 2010
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You may have to push them a little harder, squeeky wheel gets the grease. If in fact your last refi was at 79% LTV, dig out all the escrow closing paperwork and the appraisal for that transaction. Then take your proof to your current lender or a broker and they should be able to resolve this for you. Have you talked with the folks that did the refi for you? they should have most of that information still on hand.

If you were over 80% at all you could possibly have LPMI (Lender Paid MI) which means that the MI is attached to the interest rate on the loan. Example: you could have a 6% rate will $150 in MI OR you could have a 6.25% rate with out MI (it has LPMI) this might be what happened.

If you were at 79% though you should qualify for the product. Hope that helps. Good luck Sir.
  • April 29 2010
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If Clay's answer is correct, and I believe that it is, to a large degree, then the loans that the Fed Gov practically coerced the GSE's and Banks into buying and making, are not eligible for the help-out programs. How moronic is that?

I have also have had the "credit enhancement" excuse used for HARP denial's, on loans that were not CRA type loans. They were of the "stated" variety and were made to folks with stellar credit. I lean toward that being the Lenders catch all excuse, when there is no other excuse for denial.
  • April 29 2010
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I've refinanced several of the old My Community loans using DU refi plus.

also, I refinanced one that had closed as My Community ( A Fannie Mae product) but was owned by Freddie (got pooled with some Freddie loans).

the stated income loans aren't eligible for HARP.
  • April 29 2010
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The Credit Enchancement decline on Open Access is not uncommon.

The information you were given about loan pooling is indeed correct, and sadly the enhancement can be the result of events completely outside the control of you as the borrower and also the lender who originally made the loan.

If Freddie Mac LP is reading your loan as Enhanced, you will not be able to participate on Open Access.  

  • April 29 2010
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Are these loans that are being denied due to credit enhancement insured by AIG, or something? I would love to know the answer to the OP's question. I agree with the OP that the average GSE employee and Lender employee doesn't know what it means. I think the OP deserves to know exactly why their loan was CE'd, and by whom.

It does appear, to me at least, that the loans being denied due to the nefarious CE's, were originated just after the poopoo began to be spread by interaction with the fan. When it was discovered that Moody's AAA ratings were bought, and meant nothing.

The loans that I had denied for this reason, were not true stated loans, they were loans that were given documentation waivers, after being submitted as full doc. They received these waivers due to strength of the overall file, and then they were treated as leprous, when trying to access the HASP products intended to save the housing industry. It is just baffling is what it is.

I think the basic explanation is that the GSE has someone else's a$$ on the hook for losses on these loans, so they aren't undoing them, no matter who wants them to. Unless you are dead in the water, beyond the repair of the Credit enhancement arrangement, you aren't getting any help.

Sorry for the extraneous thread jack ranting, but....too much iced coffee.


  • April 29 2010
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For Freddie: credit enhancements include Recourse, Collateral Pledge Agreements, Indemnification, Spread Accounts and pool Insurance.

Freddie defines it as a "measure taken to boost the credit rating of a security".
  • April 29 2010
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Profile picture for buckthorne
I believe I may have found my answer:

http://themortgageinsider.net/foreclosure-answers/i-know-who-services-my-loan-but-who-really-owns-my-loan.html

As I suspected, this has nothing to do with me as an individual; this has to do with Freddie Mac protecting its interests and those of investors.
  • April 30 2010
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Profile picture for gearset
I was denied the HARP program as well... the reason the original mortgage company purchased LPMI in order to make the mortgage more marketable without my knowledge. Fannie and Freddys government charters require insurance at a certain percentage loans and thats who they sold it to.
I also had PMI when I purchased due to less than 20% down, but I pre-paid it at 1.something percent. So there was insurance provided on my dime P.I.F. at the table, however mortgages are a way to make money, buying and selling, and the company's will do what they want to get it done.
I have a excellent credit score, I am paid ahead on my mortgage and have a very stable good paying 14 year job and I was still told NO.
It occurs to me these programs are for those that don't really need it.
Pissed.
  • September 17 2010
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gearset, what is your balance/value/current rate
  • September 17 2010
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Profile picture for AZBeeTee
I have the same problem, is there a fix for it, how can I take the credit enhancement off Freddie mac,they did it to protect there investment why is it my problem?
  • January 13 2012
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The program was updated several months ago to stop several of the enhancements from making the loan ineligible, so they have taken some steps.

There really isn't anything you can do to get it removed on your own, and it is unfortunate that it occured through actions beyond your control.

You might try applying again in March when the latest software is updated and see if your loan still gets flagged ineligible at that point.
  • January 13 2012
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Profile picture for pjblanchard
It's 2012 and the lastes DU software still has resulted as an ineligible mtg to refi through the HARP 2 program due to "credit enhancement." This is very dissapointing.
  • July 13 2012
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Profile picture for sfaith76
We are in the same boat with the LPMI and a "credit enhancement" label. I have been trying for 3 years to refi my 6.25% loan & cannot qualify for a HARP program.  This is ridiculous and totally unfair!
  • August 15 2012
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Profile picture for user8935976
How can this even be legal?  My original loan was sold ONCE and during that transaction Freddie Mac attached the infamous "credit enhancement".

Doesn't this alter my original loan contract?  It seems to me it's unconstitutional in it's finest form.  This thing is benefiting  Freddie Mac and penalizing me and I certainly didn't ask for it!

Has anyone consulted with an attorney?
  • October 29 2012
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Profile picture for lorianne1
This is June 2013 and I was just told I cant refinance with HARP because of credit enhancement. It still has not been fix. So unfair we have a 6% loan and if this didn't happen we could have gotton a 3. I think it is on purpose. They act like they are going to help you and use some legal bull to deny you. NOT FAIR! 
  • June 19 2013
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I have had the same frustrating issue dealing with Priovident Funding for the past 3+ years with this credit enhancement BS. I am stuck in this 7.0% loan and have an excellent credit score and have always been current. I originally applied over 3 years ago! I have applied with have a dozen other banks as well and keep getting denied for the same reason. In total, they have cost me over $50K in additional interest charges that I would have saved if I were able to take advantage of this HARP product like everone else. I feel like this is intentional on Provident's part for no other reason except greed! I am searching for an attorney who will take up this cause. This sounds like an excellent class action as I see there are lots of other folks caught up in this greedy scheme which we had no say in, never approved or agreed to and certainly never received any benefit of. Anyone out there know a good attorney?
  • July 24 2013
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Profile picture for lorianne1
I dont know of one right now but count me in. we have excellent credit morg. company said we could refince  and been turn down 3 times now because of this. We never knew about in anyway till we tried. The last time the pres set up this refi stuff most were not able to then. Now again a lot of us cant. I was told only way I can get out of it is to go through everything we did when 1st brought .We cant afford all that. I was also told FM is the owner of the loan and our company Cenlar is just the servicer. We use to have Taylor bean before that. Now the rates have gone up to over 5.
  • July 24 2013
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  • August 20 2013
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We are going through the same thing.  Bank of America sold our loan in late 2011 in a pool of loans with the credit enhancement stigma.  We have never been late, have excellent credit but not much equity due to poor sales and foreclosures in our neighborhood. We want to re-fi with HARP 2 and drop from 6.75% 30 yr to low 4% for 15 yrs.  I'm thinking of contacting an attorney as well.
  • August 27 2013
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Profile picture for jainames
If anyone has made any progress re: this code 64 credit enhancement let me know.   I just spoke with Provident Funding and sure, they will refinance my loan themselves through HARP for a whopping $8000 in  closing costs and fees.  They have held my loan since 2005 and the "discount" they will include in my refi. package is a whopping $270.  That's what I am worth to them.   Class action suit anyone?  We have all been robbed of the opportunity to take advantage of the lower interest rates that are going to go away soon through no fault of our own.  My credit score is excellent.  Anyone interested? 
  • July 18 2014
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Freddie lifted many of the enhancements from being ineligible some time ago, but the Provident loans might still be coded that way due to the pooling agreements they used.    Have you had a lender recently run your application in Open Access (If Freddie Mac) or DU Refi Plus (if Fannie Mae)?    If you are still getting ineligible in those then that will be the same anywhere your apply outside of current servicer.

Property value are way up in many areas over the last few years, your other option of course would be if you had a loan to value to allow for traditional refinance.
  • July 18 2014
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Profile picture for java01
It's January 2015, and I was just told that I am ineligible for HARP by Fannie Mae because of a credit enhancement. I don't have PMI so, I waiting for my bank, to explain, they promised to call me next week. Does anyone know if there's any way to file a complaint about this? This is so unfair.
  • January 30
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Profile picture for user3742370
I am in the same situation.  Provident Funding will not give me the option (even at inflated closing costs) because the original appraiser (that they selected) is on their own internal fraudulent list.   I think its just another way to keep me at 6.5%.   I would definitely sign up for litigation.  
  • February 02
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