Note: The HARP program expired December 31, 2018. See MoneyTips for alternatives.
The Home Affordable Refinance Program (HARP) was established in 2009 as a way to help struggling homeowners refinance in the aftermath of the housing crisis. Because of lower down payments and the sharp decline in home values, many homeowners were left with very high loan-to-value (LTV) ratios that left them ineligible for refinancing under Fannie Mae or Freddie Mac. HARP was designed to give these homeowners relief from unsustainable terms.
By refinancing, borrowers can take advantage of a lower interest rate to reduce their loan payments or shift out of a less-stable loan product into a relatively low fixed-rate loan. Since HARP's inception, over 3.4 million homeowners have taken advantage of HARP to refinance into a more manageable loan – and, in some cases, perhaps save their home.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, estimates that another 143,000 homeowners can still qualify to take advantage of HARP but have not done so. Interest rates have remained low enough that refinancing is still viable for many homeowners. As a result, the agency is extending the HARP program until December 31, 2018, to give homeowners one last chance to use this valuable program.
The HARP deadline has been extended several times in the past. This (presumably) last extension allows the HARP program to provide a bridge to the FHFA's new High LTV Streamlined Refinance Programs that will replace HARP loans in 2018 (Freddie Mac's Enhanced Relief Refinance and Fannie Mae's High Loan-to-Value Refinance Option).
How do you qualify for a HARP loan? Your current LTV ratio must be at least 80% and your loan must have originated on or before May 31, 2009, and be backed by either Fannie Mae or Freddie Mac. You must be current with your mortgage payments and have no more than one payment more than thirty days late over the previous twelve months (and no late payments over the previous six months). The HARP website contains useful look-up tools to help you calculate your LTV ratio and to help you determine if your loan is backed by Fannie or Freddie.
The property to be refinanced must be your primary residence, a single-unit second home, or a rental property of no more than four units. In addition, you can only use the HARP program once for a property (unless your previous HARP refinance was between March and May of 2009).
While the HARP program and the replacement Streamlined Refinance Programs have similar requirements, they are targeted at different groups. The new programs will be for loans that originate on or after October 1, 2017, and are aimed at homeowners that have 5% equity or less, including underwater homeowners (those owing more than their home is worth based on current market value). Homeowners with greater than 5% equity in their principal residence will likely be directed to other programs – thus the need to extend HARP to give these homeowners a viable option.
HARP relieves the pressure on LTV values, but overall risk is still an issue. You can still be rejected for a HARP loan with bad credit or other risk factors that make you a poor risk for repayment. Check your credit report for any issues that might torpedo your application. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
If you are one of the estimated 143,000 homeowners who could still benefit from the HARP program, look into your options today. The HARP replacement program may not be for you – and, despite all evidence to the contrary, the HARP program isn't going to last forever.
MoneyTips is happy to help you get free refinance quotes from top lenders.