Home LoansMortgage RefinanceHARP Replacement Programs in 2019 for Underwater Borrowers

HARP: What is it and how does it work?

For many homeowners, the housing boom and subsequent slump of the early 2000s are little more than a bad memory. But others who purchased homes at the height of the housing bubble may still be feeling the pain — owning homes with little or no equity, unable to refinance and take advantage of lower interest rates or sell without losing their investment.

Millions of homeowners who are underwater on their mortgages have received some relief though. As of November 2017, more than 3.4 million homeowners took advantage of refinancing through the Home Affordable Refinance Program (HARP) since the program’s inception.

What is HARP?

HARP was created by the Federal Housing Finance Agency (FHFA) in 2009 in response to the increasing number of Americans struggling with underwater homes after the 2008 financial crisis. The program helps homeowners who are current on their mortgage payments but have little or no equity in their homes, refinancing their mortgage into a more affordable mortgage without incurring new or additional mortgage insurance.

The HARP website says the program “targets borrowers with loan-to-value (LTV) ratios equal to or greater than 80% and who have limited delinquencies over the 12 months prior to financing.”

In simple terms, that means a homeowner with a home valued at $250,000 would need to owe $200,000 (80%) or more on their home to qualify. They would also need to be current on their mortgage, with no payments 30+ days late in the last six months, and no more than one payment 30+ days late in the past 12 months.

How does HARP work?

If you qualify for HARP refinancing, you may be able to save a significant amount of money by lowering your monthly payment, reducing your interest rate, switching from an adjustable rate mortgage to a fixed-rate mortgage or shortening your mortgage term from 30 years to 15 or 20 years.

Keep in mind that HARP will not reduce the principal amount of your mortgage. The amount you owe will not go down, but you may be able to save money by reducing the amount of interest you’ll pay over the life of the loan or paying down the principal faster.

What are the eligibility qualifications?

In addition to the LTV and delinquency requirements mentioned, there are some additional qualifications you need to meet for a HARP refinance. They are:

  • The home must be your primary residence, a one-unit second home or a one- to four-unit investment property.
  • The loan must be owned by Freddie Mac or Fannie Mae. If you’re not sure whether your loan is owned by one of the two mortgage giants, you can find out by using the loan look-up tools for Fannie Mae and Freddie Mac, or by calling 1-800-2FANNIE or 1-800-FREDDIE. Be sure to check your address with both Fannie Mae and Freddie Mac as there’s not one central database covering both.
  • The loan must have originated on or before May 31, 2009. The loan look-up tools referenced above can also provide your loan’s origination date if you’re unsure.

Even if you’ve been turned down for HARP refinancing in the past, you should consider trying again. The program has undergone some significant changes since its launch in 2009.

For example, the program initially required borrowers to have a present LTV ratio no greater than 105%. Shortly after the program’s inception, the FHFA expanded the program to include borrowers with LTV ratios up to 125%. In 2011, the ceiling was eliminated altogether, making more borrowers eligible for the program.

What documents do you need?

The process of applying for a HARP refinance may be similar to the process you went through when you got your original mortgage.

You will likely need:

  • Past two years’ tax returns and W-2s
  • Pay stubs for the last three to six months
  • A listing of any outstanding debts
  • A listing of any other assets such as brokerage accounts, savings accounts and more
  • Recent mortgage and bank statements.

You may also be asked to provide a “hardship letter” explaining your current financial situation and other documents required by your lender, but this list is a good start.

Where to get a HARP refinance?

You can get a HARP refinance by working with your existing lender or working with a new lender that participates in the program. In some cases, you may be able to reduce the amount of documentation you need to provide by working with your existing lender, but make sure you shop around to ensure you’re getting your best rate available.

Matt Hackett, operations manager at Equity Now, Inc. in New York, says there’s not a master list of HARP-approved lenders but any lender that sells to Fannie Mae and Freddie Mac and even lenders that sell to large banks can originate HARP loans. “The key is to ask if they have overlays to the HARP guidelines,” Hackett said. “If they do, then they will be limited by those overlays and will not be able to help all borrowers.”

Overlays are the rules of individual mortgage lenders that are stricter than Fannie Mae and Freddie Mac guidelines. For instance, where Fannie Mae may require a minimum credit score of 620, your lender may have an overlay that says they don’t work with borrowers with credit scores below 660.

In short, if you are denied by one lender, don’t give up.

“As in the case of any mortgage application,” Hackett said. “It’s imperative that a potential borrower seek a second opinion, maybe even a third if they are denied. Lenders have different guidelines, overlays and lending acumen, which requires borrowers to be proactive and make sure they’ve exhausted their options before giving up on getting a new mortgage.”


Many lenders are unwilling to refinance underwater mortgages because borrowers with little or no home equity are more likely to default on their loan. The HARP program is not the only option available, but it does offer some advantages that may be difficult to find outside of a government-backed program, including:

  • No appraisal requirements. Most homeowners do not have to get an appraisal as part of the refinance, making the process smoother, faster and less expensive.
  • Reduced fees. As an incentive to get borrowers to refinance into shorter-term loans (and thus save a significant amount of interest), HARP reduced fees for borrowers refinancing from 30- to 15-year mortgages.
  • Less paperwork. FHFA made the refinance process easier by reducing documentation requirements for income verification.

Watch out for scams

Of course, wherever there are vulnerable consumers, scammers look to take advantage and mortgage refinancing scams are no exception. The FHFA and the Consumer Financial Protection Bureau (CFPB) warn homeowners to:

  1. Beware of companies that ask you to pay an upfront fee in exchange for help.
  2. Beware of companies that pressure you to sign paperwork you don’t understand.
  3. Beware of companies that promise to “save” your home, get the terms of your mortgage changed or reduce the balance of your mortgage.
  4. Never make a mortgage payment to anyone other than your mortgage company without checking with your mortgage company first.

If you can’t pay your mortgage, get free advice from a HUD-approved housing counselor. You can find a list of legitimate housing counseling agencies in your area using the CFPB’s Find a Housing Counselor tool.

If you believe you might be eligible for HARP refinancing, talk to a lender soon. The HARP deadline has been extended several times, most recently to December 31, 2018. For the 1.36 million homeowners who still owe more on their mortgages than their homes are worth as of November 2017, there’s still an opportunity to take advantage of a HARP refinance and save money each month.


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