In 2009, the Federal government created the Home Affordable Refinance Program (HARP) to help homeowners with little or no equity get out from under loans that grew proportionately larger as property values cratered. Recently, the Federal Housing Finance Agency extended the original HARP deadline until September 17, 2017 so more struggling owners could climb aboard the lifeboat.
Private lenders responded to the bank/housing crisis by declining to refinance underwater properties without mortgages backed by Fanny Mae or Freddie Mac. Today, through HARP refinancing, qualifying homeowners can get lower interest rates, shorter loan terms, or they may convert their adjustable rates to fixed-rate mortgages backed by Fanny Mae or Freddie Mac.
Since the program was launched in 2009, 3.2 million American homeowners have benefitted from HARP refinancing. According to the Federal Housing Finance Agency, in 2011 the government relaxed HARP qualification requirements to allow more homeowners to enter the HARP refinancing program. Today, the applicant's mortgage balance must exceed 80 percent of the home's value. Originally, owners could only qualify if the mortgage value was at or higher than 105 percent of the property value. The 2011 changes also eliminated the loan-to-value (LTV) ratio ceiling, and the property appraisal requirements were stricken for many applicants.
A HARP scenario:
Say a homeowner has a qualifying loan with a current balance of $200,000. Using a property valuation of $150,000, for example, the owner could save about $3,000 annually just by refinancing the interest rate from six percent to four percent.
HARP Qualifications and Requirements
According to the FHFA, HARP qualifications and requirements stipulate that applicants:
- Are current on their mortgage with no 30-day or longer late payments for the previous six months and only one late payment for the past 12 months.
- Make the home their primary residence (includes a one-unit, second home or a 1- to 4-unit investment property).
- Have a loan that originated on or before May 31, 2009.
- Have a current LTV ratio greater than 80 percent.
- Have a mortgage backed by Freddie Mac or Fannie Mae.
Consumers can go online to find out if their mortgage is backed by Fanny Mae or Freddie Mac. HARP requirements to not include mandatory private mortgage insurance (PMI) or lender-paid mortgage insurance (LPMI). But insured homeowners must continue the existing level of coverage under their HARP loan.
Here are three online tools to help homeowners further crunch their numbers:
- Fannie Mae's LTV calculator
- LendingTree's Live Rates for Refinancing
- LendingTree's Free Credit Score
Consumers who have yet to miss a house payment but fear the day is coming can avert foreclosure and stay in their homes through HARP and short-term options. Fannie Mae recommends that owners with past-due amounts should contact their mortgage company to work out a repayment plan that resolves delinquencies and allows them to pay missed payments on a new schedule.
There are also forbearances from lenders, temporarily suspending payments if the borrower expects a financial upturn. Finally, owners who do not qualify to refinance should see if they are eligible for the Department of Housing and Urban Development's Home Affordable Modification Program (HAMP) to reduce the amount of their monthly loan payments.