What is HARP?

by Sheila Savon

Updated on Jan 8, 2017

Deadline: The HARP program ends in September 2017, start your application process today.

The Home Affordable Refinance Program (HARP) is supported by the Government of the United States, it is one among the programs run by the Federal Housing Finance agency since March 2009. The program targeted refinance applications from homeowners rejected by other lenders. HARP is intended for individuals struggling to pay off their mortgage due to the after warmth of the housing market crash. The Home Affordable Modification Program (HAMP) was created to help homeowners facing foreclosure, to take steps to effectively increase the LTV on their property.

History
When the U.S housing market crashed in 2008, causing prices on houses to fall even below the value of mortgages held by individuals, homeowners were not allowed to refinance their houses using low interest rates, as most lenders required a LTV (loan-to-value) of 80 percent to be able to avail refinancing. Even though houses had almost a quarter of their principal value reduced, homeowners still had to pay mortgage rates that were only a bit reduced from before the crash. A home worth $140,000 was now worth only $90,000, and yet the homeowner had to pay mortgage that valued their homes at $120,000. Even though these homes had a LTV of 120 percent, which would deduct all mortgage insurance, after the crash they had to pay mortgage insurance despite the increased LTV on their homes.
Home Affordable Refinance Program
The program allowed borrowers with a LTV exceeding 80 percent to refinance their houses after negating mortgage insurance. HARP 2.0 was a revamp of the original program and came into existence in December 2011, it protected mortgages up to a 30 year period by dismissing limits on negative equity. This new rule helped pull in homeowners who owned 125 percent and more into the program by refinancing their mortgages without mortgage insurance. New mortgage lenders were given recourse against defaulting on the original loan, increasing lender participation in the federal program.
Criteria's for Qualification
  • The program helps homeowners with good credit histories, to reclaim the value of their homes by refinancing it using low interest rates, and to avoid mortgage insurance as well as setting down a fixed interest rate to increase stability.
  • The program can be used by borrowers whose loans are owned or guaranteed by Freddie Mac or Fannie Mae. These are mortgage corporations that are protected by the federal government.
  • The homeowner should be an occupant in a separate house that may be a duplex, triplex, condominium or a four unit property.
  • The borrower should have made mortgage repayments, no later than 30 days during the last 12 months, failing to have this requirement would not qualify a homeowner for the program.
  • The LTV should not exceed 125 percent of the principal market price of the property.
  • Borrowers with second loans will not avail the 125 percent limit.
  • On refinance, the borrower is not allowed to cash in on the equity, but cash from such transactions should go into closing costs to the mortgage.
  • Interest-rate on the mortgage would follow the price set out by the market and these rates can fluctuate according to the lender.
  • Homeowners will have to pay fees associated with refinancing, including points.
  • The borrower's credit score will be analyzed to ascertain if he/she can afford a new mortgage.
  • This program will not alter the borrowers pre-existing loan balance.
  • If a borrower already has PMI, they are expected to continue to pay insurance, but for homeowners who do not have insurance, the new mortgage does not require it.
    • Disqualified from HARP
    Paychecks stubs for the last two months.
  • In case of self-employment, tax returns and balance sheets from your company.
  • Paperwork showing Income tax returns such as W-2's.
  • Details on all loans taken in your name.
  • Bank statements.
  • Evidence that you have paid the minimum on monthly credit debts such as student loans, car loans, credit card repayments etc.
  • Ask a lender for an assessment form, filling it will help you ascertain if you are eligible for the HARP program.
  • Driver's license.


    • HARP 2.0 required refinancing to be similar to the coverage offered by the original loan, most lenders were unwilling to fulfil this obligation. It also enabled borrowers to go to other lenders to refinance their home, when the original lender denied a refinance package. A homeowner can opt to go in for automated valuation rather than have a appraisal done, thus saving a bundle on costs towards refinance. In 2012, Obama proposed HARP 3.0 claiming, "every responsible homeowner the chance to save about $3,000 a year on their mortgage". The program would have expanded HARP to other mortgage lenders without limiting it to Fannie Mae and Freddie Mac. It is yet to launch, and may never come to fruition with the change of government in 2017.
    Holding two Mortgages through HARP
    A homeowner can take out two mortgages by abiding to rules set forth by HARP, which dictates that the first mortgage holds primacy over the second in terms of repayments. A borrower's obligation towards the second mortgage and the lender should be met only after repayments on the first mortgage are fulfilled in a month. In addition, you can also refinance a rental property through HARP if it qualifies for the refinance. HARP barred investors from availing the loan, but with the 2.0 version, investors were included but charged higher interest rates over those who resided in homes that required refinancing.
    Other Federal Programs
    Federal Housing Administration (FHA), Veterans Affairs (VA), and U.S. Department of Agriculture (USDA), Making Home Affordable (MHA)

    Other Blog Posts

    About Smart Finance Guru

    Smart Finance Guru aims to provide users with some of the best rates for their existing or new mortgage loans. Smart Finance Guru is a free online service that empowers people to save more money by providing access to a variety of service providers. This 100% free service aggregates information from extensive resources, providers and companies to give users the choice they need to select the ideal service provider for their mortgage.