Homeowners Still Have Time Before Deadline Ends

Last updated: March 18, 2017

The HARP refinancing program for homeowners was introduced under President Obama by the Federal Housing Finance Agency in March 2009. Unfortunately, this program was set to expire at the end of December 2016. Fortunately, however, a recent extension of the program means that it’s not too late for some homeowners to cash in on the savings!

What is the HARP Program?

The purpose of HARP or Home Affordable Refinance Plan is to make homeownership more affordable. This was achieved by lowering the loan to value percentage requirements for the ability to refinance mortgages without mortgage insurance. HARP dropped refinance loan to value percentage eligibility requirements from 105% to anything above 80%. This made refinancing more available to homeowners which then made monthly home payments more affordable. This was possible by taking the high-interest loans and either reducing fixed interest rates or converting adjustable rate mortgages to fixed rate mortgages.

Why Did HARP Come About?

In 2008, the housing bubble burst. When this happened, the number of houses for sale rose dramatically which, in turn, sent property prices crashing. This set of circumstances meant that homeowners found themselves owing more on their mortgages than their property was worth.

Couldn’t these homeowners refinance once the housing market started to bounce back? Most banks at the time required homeowners to have a loan to value ratio of 80% or lower in order to qualify for refinancing and this eliminated the vast majority of homeowners affected by the real estate market crash. This also meant that in order to refinance, homeowners would have to purchase mortgage insurance to make their refinance less of a risk to financial institutions.

This is where HARP originates. In 2009, the Federal Housing Finance Agency introduced HARP as a way to assist those still in crisis with their mortgages. By reducing the loan to value eligibility requirements for refinancing mortgages without mortgage insurance, HARP hoped to rebuild stability in the housing market.

The 5 Qualifying Criteria for the HARP Program

In order to be eligible to get in on the benefits of the HARP program, you must meet the following 5 criteria as well as act before the HARP program is ended.

  1. Your home loan must be backed by or owned by Freddie Mac or Fannie Mae.
  2. The current ratio of your home loan to home value is more than 80%.
  3. You have no more than one late mortgage payment in the last year and no late payments of 30 days or more in the past 6 months.
  4. Your home must be your primary living place, second home, or investment property.
  5. Your home mortgage must have originated on May 31, 2009, or before.

HARP 2.0

In December 2011, the HARP program was revamped. This new version of HARP made refinancing for homeowners even easier by allowing homeowners to refinance with any lender. The prior version of HARP allowed homeowners with private mortgage insurance to refinance, however, it required the new mortgage to cover the same amount of mortgage insurance as the homeowner had with their previous mortgage. This requirement made many lenders reluctant to refinance mortgages which carried private mortgage insurance. By revamping HARP to allow homeowners to refinance with any lender, more avenues for refinancing were opened.

Harp 2.0 also established higher mortgage rates for refinanced properties that were not serving as places of owner occupancy. Additionally, homeowners were now permitted to forego home appraisals, but only if there is a reliable automated model of valuation available in the area in question.

HARP 3.0

Although reference was made to further expanding savings for homeowners under the HARP plan, HARP 3.0 never came to fruition. Referenced in 2012 by President Obama, the third reincarnation of the HARP plan was to assist responsible homeowners in saving around $3,000 per year on their mortgages. It was also rumored that the plan was going to expand eligibility for HARP refinancing to mortgages with lenders other than Fannie Mae and Freddie Mac.

While the third incarnation of the HARP program never came into being, there is still time to apply for refinancing under HARP 2.0.

Applying Under the Current HARP Program

Assuming that your current mortgage meets the criteria established by the federal government for the HARP program, how do you go about applying for HARP?

Firstly, it’s important to know that mortgage servicers may implement their own additional regulations over refinancing under HARP.

Secondly, if you have successfully applied for refinancing under the previous version of HARP, know that you are not eligible for HARP 2.0.

Lastly, if you are interested in applying for refinancing under HARP, begin the process by contacting a mortgage lender who offers to refinance under HARP. Complete the application process with that lender making sure that you are familiar with any additional requirements of the lender.

What to Do If You Are Refused Refinancing Under HARP 2.0

If you are refused refinancing under HARP 2.0 when applying with one lender, it is worth talking to a second lender about a HARP refinance. You may still be approved, but only if the refusal is based on non-qualifying criteria. For example, if you are refused HARP 2.0 refinancing because you have already refinanced under the original version of HARP, you will not be able to gain approval from any HARP 2.0 lender. If, however, you are refused HARP 2.0 refinancing due to lender requirements rather than federal requirements, try consulting a second lender.

The End of HARP

HARP was originally scheduled to be terminated on December 31, 2016. In August of 2016, however, the Federal Housing Agency agreed to extend the program to September of 2017. What does this mean? It means that in order to benefit from a reduced mortgage rate under the HARP program, you must act now!

Is it possible that HARP will be extended once again? While it is entirely possible that HARP 2.0 could be re-extended, it is doubtful. Under the current administration, there has been a general pattern of overhaul and desire to create new programs rather than adjust those already in place. So, with that said, it’s a good time to consider HARP 2.0!