HARP Program

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What is HARP?

The Home Affordable Refinance Program, or HARP, was a federal government initiative introduced in 2009 after the housing crisis to help struggling homeowners. It is no longer active.

HARP’s purpose was to help mortgage borrowers who were underwater on their loans — meaning they owed more than what their house is worth — to refinance their mortgage. The loans had to be owned by either Fannie Mae or Freddie Mac, the government-sponsored enterprises that purchase loans from mortgage lenders.

For these borrowers, HARP provided relief to eligible homeowners through at least one of the following methods:

  • An interest rate reduction
  • A shorter loan term
  • Switching from an adjustable-rate mortgage to a fixed-rate mortgage

The program had been extended a few times over the last few years, but ended on Dec. 31, 2018.

HARP alternatives

While HARP is no longer an option, there are other alternatives for borrowers who owe more on their mortgages than their homes are worth and want to refinance.

As HARP was coming to an end, Fannie Mae and Freddie Mac introduced options for underwater homeowners who didn’t meet standard refinancing guidelines but still wanted to take advantage of lower interest rates or switch from an adjustable-rate mortgage to a fixed-rate one.

These new programs help homeowners with a high loan-to-value ratio, which compares the mortgage debt on a home to its value. Both programs require homeowners to have a minimum loan-to-value ratio of 97.01%. This means on a home worth $200,000, the loan balance can be $194,000 or higher.

Fannie Mae’s High LTV Refinance Option

Fannie Mae began offering its high loan-to-value refinance option on Nov. 1, 2018. This program is aimed at helping people who are making on-time payments to refinance their loans.

Some of the main eligibility requirements include:

  • Having an existing Fannie Mae-owned mortgage
  • Having a closing date on or after Oct. 1, 2017 for your existing mortgage
  • Waiting at least 15 months between your closing date and refinancing date
  • Being current on your mortgage payments
  • Having no late payments in the last six months
  • Having only one 30-day late payment over the last 12 months (delinquencies more than 30 days aren’t allowed)

Additionally, the borrower must benefit from the high LTV refinance program by receiving a lower principal and interest payment, lower interest rate, shorter loan term or more stable mortgage product, such as replacing an adjustable-rate mortgage with a fixed-rate mortgage.

Freddie Mac’s Enhanced Relief Refinance Mortgage

Similarly, Freddie Mac’sEnhanced Relief Refinance program began accepting applications Nov. 1, 2018. Interested homeowners must meet the following criteria:

  • Have a 15-, 20- or 30-year conventional mortgage, or a 5/1, 7/1 or 10/1 ARM
  • Existing mortgage must be owned or securitized by Freddie Mac
  • Have a closing date on or after Oct. 1, 2017
  • Wait 15 months from the original closing date before the refinance
  • No 30-day delinquencies in the past six months
  • No more than one 30-day delinquency over the past year

Borrowers benefit by receiving an interest rate reduction, lower principal and interest payment, fixed-rate mortgage or shorter loan term.

Is a refinance right for you?

Whether you have negative or positive equity, be sure you’ve done your due diligence before deciding to refinance your mortgage.

Since a refinance means you’ll start over with a new mortgage, there will be closing costs and other fees, which might cost you about 2-3% of your new loan amount. Be sure you get the best deal on your refinance by shopping around with multiple lenders and comparing costs. You could also ask each lender if they offer a no closing-cost refinance, but be mindful that this type of transaction will increase your loan amount.

If you’re specifically trying to reduce your monthly mortgage payment, refinancing isn’t your only option. Consider these other methods of lowering your mortgage payment.