The Home Affordable Refinance Program (HARP) is one of the two key programs established by the federal government to help homeowners affected by the recent subprime mortgage crisis. The beneficiaries of these two programs are those whose home values have fallen below their mortgage amounts (commonly known as being "underwater"). These two programs target homeowners who are:
- Defaulting on Payments – If you are missing payments and are in imminent danger of foreclosure, the Home Affordable Mortgage Program (HAMP) was created for you. See our HAMP 101 article for information regarding this program.
- Current on Payments – In this case, you have sufficient financial means to avoid foreclosure, but aren't able to secure refinancing to lower payments or save on interest. This is where HARP may be music to your ears.
Although the primary target is the underwater homeowner, you don't have to be underwater to qualify. However, you can't delay too long – the program is scheduled to end on September 30, 2017.
The point of the HARP program is to reward homeowners who have made their payments diligently with the opportunity to refinance under better loan terms than they would be able to get with their current loan-to-value (LTV) ratio. The refinancing does not reduce your principal amount, but it may result in lower monthly payments, or in the same payments with a savings on interest over the life of the loan.
The FAQ section of harpprogram.org contains examples of how shortening the term of a loan can save money in several ways. In addition, many online mortgage-refinancing calculators will allow you to play with different scenarios and explore the potential savings.
Remember – while HARP may allow you to get better terms, it has closing costs just like any other refinancing program, so you must take them into account when checking your loan options.
To qualify for the HARP program, you must meet the following criteria:
- Mortgage Ownership – The mortgage must be held by Fannie Mae or Freddie Mac, and sold to them before June 1st, 2009. Online tools can help you determine ownership if you are not sure, or you can contact your mortgage company for clarification.
- First HARP Refinancing – The mortgage cannot be a previously financed HARP loan unless it was refinanced in the three months prior to June 1st, 2009.
- LTV Ratio – Your current LTV ratio must be greater than 80%.
- Good Payment History – You must be current in your mortgage payments, with no missed payments during the last twelve months prior to application.
You can qualify for HARP with a second mortgage, but the lender with the junior lien must agree to stay in that position.
Not all lenders participate in the HARP program. Check with your lender or on the online lists available at the Freddie Mac and Fannie Mae websites. Links to those websites and other pertinent information about the HARP program may be found at harp.gov or at harpprogram.org.
If you qualify for HARP and have found a lender, make sure you have the necessary information available when you apply. You will need all documents regarding pre-tax income for all homeowners on the loan including your most recent income tax return, information about any other liens, and your account balance and minimum monthly payment information on all debts including credit cards.
If you are underwater or nearly so, and think that you may qualify for the HARP program, check into your options to see if it's right for you. Don’t delay, as this program is scheduled to end before 2018 rolls around. What do you have to lose besides an onerous mortgage?