What Is the Home Affordable Refinance Program (HARP)?
You might have heard that there were some problems a while back with declining mortgage values. The Home Affordable Refinance Program was created to address that issue and help more homeowners get a leg up. It’s scheduled to end this year, though, so if you’re eligible, you need to read this page. Or, if you’re in a rush, you can contact our experts at Home.Loans and we’ll talk you through it all.
Home Affordable Refinance Program Basics
Back in what now seems like the Dark Ages, considering that you’re probably reading this on a teeny mobile device, the housing market was on fire (this was in the early 2000s). It was glorious and the fun looked like it would never end. Then, just like in the movies, it did. And it ended up really hurting a lot of people who bought their homes right before that housing market burned itself into cinders and failed to re-emerge as a glorious phoenix.
It was more of a sick pigeon.
In response to that sick pigeon of a real estate market, a lot of people just walked away from their homes, since they had no hope of ever paying them down enough to have any equity. Things got so bad, that “Jingle mail”, a term for parcels containing house keys being sent back to lenders, became a popular phrase in real estate circles. Then along came HARP in 2009, offering those underwater homeowners a way out of the adjustable rate mortgages and other instruments that were slowly crushing the life out of them.
HARP is an affordable refinancing program born from the Federal Housing Finance Agency (FHFA). Its purpose; to help homeowners whose mortgages were higher than their home's value, or who were nearing this "underwater" state who couldn't get a loan modification through other means, to refinance their mortgage and avoid foreclosure. HARP is designed to lower monthly payments regardless of how underwater a borrower may be!
Pros and Cons of the Home Affordable Refinance Program
HARP has grown and changed a lot since its inception in 2009. In the beginning it was somewhat difficult to qualify for since the rules were very strict, but today it’s much easier. Even so, it still has its drawbacks, like anything.
Fixed rates for everybody. The primary goal of the HARP program was to stop the runaway train of adjustable rate mortgage payments. They were growing so fast that homeowners couldn’t keep up. HARP mortgages all have fixed rates.
No loan to value limits. It doesn’t matter how underwater your mortgage is, you can use HARP if you otherwise qualify. The old upper limit was 125 percent, but that has since been lifted.
Very low fees. Since there are no appraisals or underwriting involved, the fees related to HARP are minimal. The goal is to flip your mortgage into a similar mortgage with a better rate and a shorter-term when possible.
Nearing an end. The HARP program has been extended a few times, but is now scheduled to end December 31, 2018. If you’re eligible or think you might be, now is the time to act.
Not all banks will offer HARP funding. Not every bank is hip on handling these kinds of loans. It can be frustrating to find a bank that will help sometimes, but they are out there.
Limited to a small pool of owners. Not all homeowners are going to be eligible for this program. In fact, if your loan was originated after May 31, 2009, you’re already out of the pool. If your LTV is lower than 80 percent, you were just excluded. If your loan isn’t owned by Fannie Mae or Freddie Mac, HARP won’t work for you.
Who’s the Ideal HARP Borrower?
The Home Affordable Refinance Program was designed for a very specific borrower from the start. The main conditions for the program are that the mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae (can't be a non-conforming loan) and sold to borrowers before May 31, 2009. This borrower was the most seriously hurt by the financial crisis that gripped the country during the mid-2000s and caused the real estate market to crumble. They:
Still have little to no equity, or are even upside down in their mortgage.
May still have an adjustable rate mortgage on their home.
Have made their payments on time, despite it all.
This ever-shrinking group of buyers have somehow persevered despite sometimes high interest ARMs that made it difficult to find the money for their house payments, being told that they’d be better off to just walk away from their homes and even watching as all their neighbors abandoned the neighborhood. In exchange for this, they get fixed rate mortgages, good terms and some relief for the first time in a decade.
Homeowners have many benefits through HARP. Besides the obvious reduction of monthly interest, there are a few added bonuses. For example, a homeowner can use HARP to switch from an adjustable-rate mortgage to a fixed-rate mortgage, with a steady monthly rate they can be certain of. HARP also helps to grow home equity over time by shortening loan terms to slowly save homeowners from being underwater with their mortgages.
Thanks to recent changes to the program, HARP now has lower closing costs by eliminating the need for appraisals or underwriting.
HARP Refinance: In Review
HARP isn’t a program for the general public. At this point, it’s more a program for that one guy in Sarasota who hasn’t heard the news yet. Since all of these loans were originated nearly a decade ago, most of their borrowers have either sold, been foreclosed upon or found some other solution (like refinancing when HARP was first offered).
We just wanted to make sure that if Bob in Sarasota was reading this page, he’d contact us at Home.Loans and ask how he can get in on HARP before it ends. We’re here to help, Bob, just give us the green light.