If you are underwater on your home (owe more than it’s worth) yet have stayed current on your mortgage payments, HARP is here to help you. HARP stands for the Home Affordable Refinance Program and is designed for you to refinance and obtain more affordable payments and interest rates than you have on your original mortgage. As a rule, if your current loan balance is more than 80% of your current property value, the HARP program is well worth a look. For a mortgage to be eligible for a HARP refinance, it must be already be a conventional loan that’s securitized by Fannie Mae or Freddie Mac, which a large percentage are. Property types that are eligible for a HARP loan include primary residences, second homes and residential investment properties.
Home Affordable Refinance Program
The US government established the HARP loan program in 2009 during the midst of the housing crisis to help underwater homeowners gain access to lower interest rates. Initially the HARP program had little success. Then, in 2011 a congress released a revision of the program creating new rules that many more people to qualify. This revision was affectionately branded HARP 2.0. Since that occurred, more HARP 2.0 loans were closed in 2012 that in the first three years of the program combined.
HARP can help if you’re drowning
Fannie Mae has estimated that the HARP refinance program saves it’s borrowers an average of $4,300 in annual savings. There is no upward limit to the percent you presently owe (and can refinance) over your property’s current value. That’s so amazing it’s worth repeating. Commonly called the LTV, there is no ceiling on your loan-to-value ratio. There is a floor, and it is more than 80%. In other words, no matter how much your real estate value has fallen compared to your existing loan, you can still meet HARP eligibility for refinance as long as you meet the other requirements.
You must have obtained your loan before June, 2009 and it must have been for 80% or less of the property’s value at the time. You must have been current on your payments for at least the last six months. And you can only use HARP program funds to refinance the present balance of your mortgage. There are no cash-out options and you cannot do a HARP refinance twice unless you have a Fannie Mae HARP mortgage that was obtained between March and May of 2009.
HARP Program Past, Present and Future….maybe.
HARP 1 (Past)
When the original HARP refinance program was launched on 2009, it would be fair to say it got off to a slow start. HARP 1.0, as it’s now referred to, was not embraced on a large scale by larger lending institutions. There were limits and restrictions on how much a property could be underwater in it’s equity and that had a negative effect. Over time, it gained some momentum and resulted in about a million refinance loans in it’s first few years.
HARP 2.0 (Present)
As 2011 neared an end, the HARP program was expanded by congress to broaden the base of homeowners that could take advantage of record low interest rates. Major improvements brought about by the HARP 2 program included the removal of the home appraisal requirement and the loan-to-value restrictions. HARP 2.0 requirements also allowed homeowners to refinance with any lender in America.
Today’s HARP 2 program gives underwater homeowners the ability to refinance into a new 30-years, 15-year or even a 10-year mortgage. HARP 2.0 guidelines also allow borrowers to refinance from an adjustable-rate loan to a fixed-rate loan. Properties that can be refinanced through HARP include homes and condo’s used as primary residences, second homes and investment properties. Since it’s last revision, more HARP 2.0 loans closed in 2012 than the previous three years combined and it’s projected that over 1.2 million more will close in 2013.
HARP 3.0 (Future)
In large part due to the extraordinary success achieved by the HARP 2 refinance program, there are rumblings of another major expansion of the program that is affectionately referred to as HARP 3. Nothing has passed in congress yet to facilitate a HARP 3.0 update, but there are many interesting aspects under discussion that could help countless more underwater homeowners.
Of all the aspects under consideration for HARP 3 expansion, the most significant possible change would be the ability to refinance loans that aren’t securitized by Fannie Mae or Freddie Mac. This broad category could include all the underwater Alt-A, Subprime and Jumbo Loans that were originated in the years leading up to the 2008 housing crisis. At the moment, nobody knows if HARP 3 will make it past the drawing board. One thing is certain, however. Mortgage interest rates are not projected to remain at current levels forever. If they climb significantly, any talk of HARP 3.0, HARP 4.0 or beyond would be strictly academic.
Current HARP Requirements – Version 2.0
- Your current mortgage must be guaranteed or owned by Fannie Mae or Freddie Mac.
- Your current mortgage must have a sold date to Fannie Mae or Freddie Mac of May 31, 2009 or earlier.
- Your current mortgage must have a loan-to-value (LTV) ratio of more than 80%.
- You must be current on your mortgage payments with an on-time payment history for the last year.
HARP mortgages are available through many lenders. You do not have to go through your existing lender for a HARP refinance. A new appraisal of your property may not be required, and your application and approval process is simplified by the fact that you are in good standing on your current loan. There is no mortgage insurance premium for HARP refinancing and other closing costs may be reduced.
Is my mortgage eligible for a HARP Refinance?
If your current mortgage loan meets all of the requirements listed above, odds are you are eligible for a HARP refinance. A lot of homeowners who are seeking a HARP mortgage check simply apply with their current lender before shopping around. That doesn’t mean that the best thing to do, however. There are no restrictions on which lender a borrower can use for a HARP refi. Before you begin your lender search, it’s helpful to know the exact status of your mortgage and whether it’s eligible or not. Fannie Mae and Freddie Mac each provide search forms on their websites to check on your loan.
If, like millions of other homeowners, you recently found yourself owing more on your home than it is worth, HARP offers help for you. If you do your homework and research your options, a HARP mortgage could be just the right solution to your underwater property. If you have been turned down for a HARP refinance, verify at your qualifications and try again. Some lenders may not be up on current HARP rules, but don’t be discouraged. Your perseverance could help you swim out of that deep end and stay afloat.
HARP vs. HAMP
Not to be confused with the HAMP program, the HARP program differs from its sister program by one big letter. The ‘R’ in HARP stands for refinance while the ‘M’ in HAMP stands for modification. In other words, you can completely refinance under a HARP while you can only modify the terms of your existing loan under a HAMP. Under a HAMP, you must prove financial hardship. Under a HARP, you must only prove that you are underwater on your loan.