When interest rates fall, many homeowners will refinance their mortgage to lock in a lower interest rate, which can reduce a borrower's monthly payment or allow a homeowner to build equity more quickly. However, one group of homeowners who typically have trouble refinancing are those in negative equity. This means they owe more on their mortgage than what their home is presently worth. In the first quarter of 2020, about 1.8 million homes were in negative equity, representing 3.4% of all mortgaged properties.
In the past, borrowers with underwater mortgages could take advantage of lower interest rates by refinancing through the Home Affordable Refinance Program (HARP). However, this program expired at the end 2018.
In this article, we will discuss the benefits that HARP provided to homeowners, in addition to available existing options for homeowners looking to refinance their mortgages.
Key Takeaways
- HARP was a government program designed to help underwater homeowners refinance mortgages at more attractive interest rates.
- The program started on April 1, 2009 and ended on December 31, 2018.
- Approximately 3.45 million borrowers took advantage of HARP.
- Refinancing options for distressed homeowners today include programs from Fannie Mae and Freddie Mac.
What Is the HARP Loan Program?
HARP was a government program established in April 2009 under the Federal Housing Finance Agency (FHFA) in response to the 2007-08 financial crisis. The idea was to help homeowners refinance loans on properties that were worth less than their outstanding mortgage. Approximately 3.45 million borrowers took advantage of the program.
HARP was aimed at borrowers who had a loan-to-value ratio (LTV) of greater than 80%. Typically, these borrowers have trouble securing refinancing because of lack of equity in their homes, thus they cannot benefit from falling interest rates. Originally, borrowers were eligible for HARP assistance if their LTV ratio was no greater than 105%. This cap was raised to 125% in July 2009, then lifted entirely in October 2011.
Between the program's inception and February 2015, approximately 3.29 million mortgages were refinanced under HARP. Of these, 2.3 million had an LTV ratio of 80% to 105%. Over 567,000 mortgages had an LTV of 105% to 125%, while 421,522 loans had ratios greater than 125%.
HARP was originally scheduled to expire at the end of 2016, but the government extended the program by two years.
What Were the Qualifying Criteria for a HARP Loan?
Homeowners were required to meet the following criteria to qualify for HARP:
- A basic requirement was a mortgage owned or guaranteed by Freddie Mac or Fannie Mae, closed on or before May 31, 2009.
- The original loan must have had an LTV ratio of at least 80%.
- Crucially, the borrower could not be delinquent on their mortgage payments. They could have no late payments over the past six months, and no more than one 30-day late payment over the preceding 12 months.
- There was no minimum credit score.
The program didn't actually lend money. Instead, HARP worked with lenders to offer refinancing. Homeowners could check with their current lender or access a HARP website to see if the lender participated in the program.
What Replaced the HARP Loan Program?
Although HARP has ended, Fannie Mae and Freddie Mac both have programs for distressed borrowers to refinance their homes.
Fannie Mae High LTV Refinance Option
This program is for borrowers who pay their existing Fannie Mae mortgages on time but have an LTV ratio that exceeds the maximum allowed for a standard limited cash-out refinance.
The refinance option must result in one of the following for the borrower:
- A lower principal and interest payment
- A lower interest rate
- A shorter amortization term
- A more stable mortgage product, such as moving from an adjustable to fixed-rate mortgage
Borrowers must be current with their payments with no 30-day delinquency in the most recent six months. In addition, they can have no more than one 30-day delinquency over the past year, and no delinquency greater than 30 days.
Freddie Mac Enhanced Relief Refinance Mortgage
This program is for Freddie Mac borrowers who are on time with their monthly payments but are disqualified from the standard "no cash-out" refinance option from Freddie Mac because the new mortgage would exceed maximum LTV limits. There is no maximum LTV ratio for fixed-rate mortgages, while adjustable-rate mortgages have a maximum LTV of 105%.
The Bottom Line
Before HARP expired, the program helped millions of homeowners to refinance underwater mortgages. While HARP didn't decrease the amount they owed, borrowers benefited from lower interest rates and monthly payments. Although the program no longer exists, Fannie Mae and Freddie Mac continue to offer refinancing options for borrowers.
FAQs
Before HARP expired, the program helped millions of homeowners to refinance underwater mortgages. While HARP didn't decrease the amount they owed, borrowers benefited from lower interest rates and monthly payments.
What is the purpose of the HARP program? ›
The Refi Plus™/Home Affordable Refinance Program (HARP) helps borrowers with little or no equity in their homes refinance into more affordable mortgages.
Who qualifies for the HARP refinance program? ›
HARP is for borrow- ers whose loans are owned by Freddie Mac or Fannie Mae. HARP targets borrowers with high loan-to-value (LTV) ratios and who have limited delinquencies over the 12 months before refinancing.
Is the HARP program still available? ›
The program has since ended, but it was intended to provide relief after the financial crisis of 2008. While HARP ended in December 2018, there are still options for borrowers who are underwater on their mortgages.
Is the HARP program legitimate? ›
Homeowners with FHA, VA, and USDA loans should look into Streamline refinancing options, including the VA IRRRL for VA mortgages. Is the HARP replacement program legitimate? Yes, HARP replacement programs FMERR and HIRO are run by legitimate mortgage agencies regulated by the Federal Housing Finance Agency.
What are the benefits of harp? ›
The list of effects Stephens has witnessed is long: relaxation, sleep, emotional release, communication, lower blood pressure, distraction, connection to memories, spiritual support, joy, mood enhancement, and sometimes pain reduction. She says scientific studies back up the positive effects of live harp music.
How does a harp help people? ›
Research has shown that the sound of the harp acts upon the human parasympathetic nervous systems. It can lower our heart rate, breathing rate, blood pressure and the level of a stress hormone called cortisol.
Who qualifies for the HARP mortgage Program? ›
Borrower Eligibility
Borrowers must be current on their mortgage payments with no late payment in the past six months and no more than one late payment in the past 12 months. Borrowers should contact their existing lender or any other mortgage lender offering HARP refinances.
What do you need for a HARP mortgage? ›
Minimum credit score of 620 needed for qualifying. Income must be documented – tax returns needed for commission/self employed. Loan must have been originated before 5/31/2009. If current loan has no private mortgage insurance (PMI), no PMI is required.
Can I sell my house after HARP refinance? ›
You can, technically, sell your home immediately after refinancing, unless your new mortgage contract contains an owner-occupancy clause.
Although the HARP program was originally scheduled to end on December 31, 2016, the Federal Housing Agency announced in August 2016 that it would be extended though September 2017. The program was extended again on August 17, 2017 through December 2018.
What program replaced the HARP? ›
Fannie Mae High LTV Refinance Loan
Fannie Mae's HARP replacement is the High Loan-to-Value Refinance Option (HIRO). This program helps homeowners with little or no equity to refinance their mortgage for a lower interest rate.
What is the new HARP 2.0 program? ›
HARP 2.0 is a mortgage refinance program designed to help homeowners whose properties have become underwater, meaning those who owe more on their homes than the property is worth. HARP 2.0 was enacted on December 11, 2011 and revises the Home Affordable Refinance Program (aka HARP 1.0) enacted in March of 2009.
Can you finance a HARP? ›
Harp Financing with Musicmakers
We can offer qualified buyers up to two years of interest free financing to purchase one of our harps. Your first payment will be 10% of the cost of the harp and shipping charges, if applicable. (Note: Harps that are financed do not qualify for our free shipping program).
What company is HARP? ›
Harp, the best selling Irish lager, with its sparkling colour makes it a distinctive, yet approachable import. Harp Lager is an Irish lager created in 1960 by Guinness in its Great Northern Brewery, Dundalk. It is a minor lager brand in Ireland.
How does a cash out refi work? ›
In a cash-out refinance, a new mortgage is taken out for more than your previous mortgage balance, and the difference is paid to you in cash. You usually pay a higher interest rate or more points on a cash-out refinance mortgage compared to a rate-and-term refinance, in which a mortgage amount stays the same.
What does harp stand for in Medicare? ›
Overview. Consumer/Recipient Information. Health and Recovery Plans (HARPs)
What is the new harp program? ›
The new Making Home Affordable Refinance Program (HARP) is the Obama Administration's government refinance assistance program designed to help California home owners who's mortgage is over 80% LTV or upside down/underwater in value.
What does harp mean in healthcare? ›
Health and Recovery Plans (HARPs) will manage care for adults with significant behavioral health needs.
What does the acronym harp stand for? ›
The acronym HARP stands for Health and Recovery Plans.
