What is the HARP Program?
The HARP program was created in 2009 and stands for Home Affordable Refinance Program. A HARP loan is available for homeowners until September, 30th 2017. The program helps borrowers who have little to no equity, or are underwater on their mortgage. However, there is no loan-to-value limit, HARP is open to all homeowners regardless of LTV. The savings can be substantial, some borrowers can save as much as $400 off their monthly mortgage payment. This can be the difference between having to lose the home and living comfortably.
A HARP loan may be an option if:
- If you have no late payments on your mortgage in the past 6 months. And no more than one 30 late payment in the last 6-12 months.
- Your home is your primary residence, investment property, or second home
- The mortgage was originated on or before May 31, 2009.
- Your home value has decreased.
- If you have little or no equity
- If you are upside down on your loan
- Your loan is owned or guaranteed by Fannie Mae or Freddie Mac. Check the Fannie Mae Loan Lookup tool.
- Your loan was closed on or before May 31, 2009 (this date can be found using the loan lookup results).
- You haven’t used HARP in the past
- If you have a first and second mortgage on your home regardless of LTV.
Conventional refinances are only available to borrowers that have at least a 10% equity position for the homeowner. That means if the property is valued at $100,000 the loan amount can be no greater than $90,000. In addition, if the borrowers do decide to refinance under this scenario there are also closing costs to consider which can add to the loan amount. Yet, Congress first addressed this scenario back in 2009 with the original Home Affordable Refinance Program, HARP 1.0. Even though home values have recovered in most areas of the country since the 2008 slide, many borrowers are still underwater. HARP is the only type of refinance option that’s available to homeowners with little or no equity, or are underwater on their mortgage.
As the economy began to falter and the Federal Reserve began to lower interest rates in an attempt to restart economic growth homeowners across the country took advantage of these lower rates, freeing up additional cash each and every month. However, as the economy grew worse, property values began to fall as well. So much so that homeowners who wanted to refinance to a lower rate or refinance from an adjustable rate loan or a hybrid couldn’t do so because there wasn’t enough equity or no equity at all. HARP was introduced to address this situation.
Original HARP Program Guidelines
- Note date for the mortgage must be on or before May 31, 2009
- A full appraisal ordered to determined loan-to-value
- Loan balance cannot exceed 125% of the value of the property
- Current loan must be by Fannie Mae or Freddie Mac
- Loan must be approved using Fannie Mae or Freddie Mac guidelines
Maximum Loan to Value with HARP 1.0
HARP allowed homeowners to refinance a mortgage as long as the loan amount didn’t exceed 125% of the current market value of the property. For example, if someone owed $200,000 on a mortgage and after closing costs were rolled in the requested loan amount would be around $205,000 or so. With HARP, as long as the property appraised to the point where the loan amount didn’t exceed 125% of the current value of the home.
Without HARP, let’s say the appraised value came in at $210,000. If the loan amount was $205,000 the loan-to-value would be closer to 98% of the value. The homeowners could not refinance. Yet with HARP, because the loan amount did not exceed 125% of the newly appraised value, the borrowers could still take advantage of lower rates.
But what if the value fell to the point below the 125% guideline? It meant millions of homeowners were out of luck. Congress then met to make some important adjustments to the program in 2012 which is often referred to as HARP 2.0.
What is the HARP 2.0 Program?
HARP 2.0 got rid of the appraisal requirement entirely and opened up the Home Affordable Refinance plan. This allowed borrowers to refinance out of a higher rate into a lower one or out of a hybrid and into a fixed. This simply means whatever your home is currently worth doesn’t matter at all with the HARP 2.0 program because there is no appraisal required. What are the requirements for the HARP 2.0 program?
HARP 2.0 Requirements
- Note date for the mortgage must be on or before May 31, 2009
- Loan must be owned by Fannie Mae or Freddie Mac
Fannie Mae or Freddie Mac Ownership
The most important one addresses who owns the current mortgage. The two biggest buyers of conventional loans are Fannie Mae and Freddie Mac. Fannie and Freddie buy loans from mortgage lenders that meet their underwriting guidelines. As it relates to a HARP mortgage refinance, the loan amount must be at or below the current conforming loan limit of $424,100 and the loan must be owned by either Fannie Mae or Freddie Mac.
When Fannie and Freddie buy loans from mortgage companies those companies both make a profit off the loan while at the same time freeing up capital to make still more mortgage loans. If the loan amount is at or below the maximum amount and the loan is owned by either Fannie or Freddie the HARP 2.0 program is an option.
Servicer vs. Owner of Your Mortgage
It’s important to note here that who you send your mortgage payments to each month may not be the same entity that owns your loan. If it’s a conforming loan it’s likely owned by either Fannie or Freddie. They both have a portal on their websites that allows you to see whether or not your loan is housed there. Further, your loan must have funded on or after May 31, 2009. Before that date, the HARP 2.0 program won’t work.
Recent Mortgage History
The next qualification is you must be current on your mortgage which means no payments more than 30 days past the due date within the most recent six month period and no more than one such payment over the past 12. Other standard guidelines apply regarding verification of income and employment but the HARP 2.0 program does not have a minimum credit score requirement. The HARP plan can also work on a second home or vacation property as well as an investment property.
What is HARP 3.0?
The HARP 2.0 program was scheduled to fold at the end of 2016 but has been extended through 2017. It’s very possible that with the changes introduced since 2009 that some borrowers who did not qualify for the initial HARP loan because their loan amount exceeded the 125% threshold still think they don’t qualify and haven’t approached a mortgage lender about a possible refinance. That’s unfortunate. If this is you or someone you know that wanted to take advantage of lower rates or get out of a variable rate into a fixed rate loan but were wary of an appraised value, the HARP 2.0 program is still around and you can still refinance, even though you thought you couldn’t.
Finally, there are rumblings in Congress about HARP 3.0 coming before the end of the year. However, this rumor has been around since HARP 2.0 was introduced. HARP 2.0 appears to have reached its maximum market share. If implemented, HARP 3.0 guidelines in addition to the HARP 2.0 requirements would be:
- Minimum loan to value of 95% for Fannie loans and 97% with Freddie programs
- No note date needed eliminating the May 31, 2009 requirement
- Allows for non-Fannie and Freddie loans
- No appraisal needed yet lender may order one to determine current minimum loan to value
HARP Loan Q&A
How much money will the HARP Program save me?
The average homeowner saves $179 per month. If you got your mortgage in 2008 or earlier, you most likely have an interest rate that’s higher than the current rates. Interest rates are 30% lower than they were before 2009.
What is HARP?
HARP stands for Home Affordable Refinance Program. HARP was created in 2009 by the Obama Administration to reduce the amount of forecloses. Even if you are upside down on your loan you will still qualify for the HARP program.
I was denied a HARP loan by a lender before, can I reapply?
Yes. And you should reapply. Each lender has slightly different requirements they use for HARP refinances. As an example, one lender may require a 620 credit score, while another lender can go down to a 600 credit score. Also a lot can change in time, HARP 1.0 had a max Loan-to-value of 125%. HARP 2.0 removed the negative equity limit. Meaning that if you owe more than 125% of the value of your home you would now be eligible. Whereas with HARP 1.0 you would not qualify. So yes, apply for the HARP program again.
Can I qualify for HARP even though I am not upside down on my home?
Yes. The HARP program is not exclusively for those that are upside down. HARP no longer has a loan-to-value limit, so you can still qualify for the HARP program regardless of how much equity you have.
I had a HARP 1.0 when it first came out and then refinanced out of it. Can I use the HARP 2.0 program or the HARP 3.0?
If you had a HARP loan and refinanced out of it you can use HARP once again. What you cannot do is refinance an existing HARP loan into another. Don’t bank on HARP 3.0 because it’s not a sure thing and rates could be higher then. If you have an existing HARP loan you cannot get another
My credit isn’t very good, what is the minimum credit score?
That can vary based upon the lender but some lenders require a 620 credit score, while other lenders don’t ask for a minimum score. What they will look at however is your mortgage payment history over the previous 12 months. No payments can be made more than 30 days past the due date within the immediate six month period and no more than one such payment within the past year.
I have had a HARP loan before, can I use HARP again?
No. Unfortunately you cannot us HARP twice unless your current HARP loan is by Fannie Mae and was done between March-May 2009.
Is HARP a legitimate program
Yes. It is a program that former President Obama created in 2009 to help reduce the amount of forecloses. It won’t last forever though, the deadline to apply for the HARP program is September 30th, 2017.
Do I have to go back to my original lender or can I shop around?
It’s not a requirement that you use the same lender as long as the new lender approves the loan using the current HARP standards.