The Home Affordable Refinance Program (HARP) is a program that was birthed after the 2008 housing crisis. It was designed to assist homeowners in refinancing underwater mortgages. A loan is considered underwater or “upside-down” when the loan balance exceeds the home’s value.
The Home Affordable Refinancing Program was created to help homeowners meet up with their mortgage payments and avoid losing their homes.
Although the HARP program officially ended in December 2018, replacement programs have been set up to support homeowners who owe more than their home is worth in refinancing their mortgages.
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In the wake of the 2008 financial crisis, many American homeowners found themselves upside down or underwater on their home loans due to real estate devaluation across the country.
When a borrower has a loan more significant than the current value of the collateral it is secured against, he is said to be upside down or underwater.
As a result of collaboration with Freddie Mac and Fannie Mae, the Home Affordable Refinance Program (HARP) was available for mortgages purchased by either of these entities.
To be eligible for HARP, homeowners must have owned mortgages sold to Freddie Mac or Fannie Mae before May 31, 2009.
To slow the rate of foreclosures and assist those who had been defrauded by subprime lending in the wake of the financial crisis, the federal government established the Home Affordable Refinance Program (HARP) in 2009.
Only borrowers who qualified for the program were allowed to participate. To qualify, a borrower had to be current on their mortgage payments, and the property had to be in good condition.
Those who had already defaulted or had left the property were not eligible for the program. Any lender was eligible to assist a borrower in a HARP refinance. The program ended on December 31, 2018.
The difference between Home Affordable Refinance Program (HARP) and Home Affordable Modification Program
Another program developed to stem foreclosures following the market crash was the Home Affordable Modification Program(HAMP). The Home Affordable Modification Program (HAMP) ended in 2016, before the termination of HARP.
Borrowers who had already defaulted on their loans or were on the verge of doing so were eligible for these programs.
Unlike HARP refinances, these programs were for borrowers who had already defaulted. To modify a mortgage, a borrower must obtain the agreement of the lender, who may have different requirements for qualification.
A modification does not change the terms of the mortgage note in the same way as a refinance does.
A borrower’s credit report may show that the terms of a mortgage have been altered as a result of a modification, although it is not the same as a refinance. Modifications may impact future creditworthiness, which may result in additional tax liability for the borrower due to their debt being written off.
There are some distinct advantages to HARP replacement plans if you live in an area with a high proportion of negative equity.
The original HARP program gave borrowers only one shot at a lower interest rate for their entire loan. With the new HARP replacement plans, as long as a person qualifies, they may refinance as often as it makes financial sense.
A person’s mortgage insurance can be transferred to a new loan if they put less than 20% down on their mortgage. Even if a person’s home value has dropped, they would not need new mortgage insurance, as the current Private Mortgage Insurance (PMI) will be transferred to their new loan.
The paperwork required for a HARP replacement mortgage is less extensive than that required for a standard refinance. One can get a HARP replacement mortgage even if they have recently been through a major financial or credit difficulty. The lender is not required to document a person’s income or assets as much as in a standard refinance.
In most cases, lenders don’t evaluate an individual’s debt-to-income ratio (a measure of one’s monthly debt versus their monthly income). Depending on the location of a person’s home or their home value, an appraisal may not be required.
One may be able to get a HARP replacement mortgage even if they have recently been through bankruptcy or foreclosure proceedings. The normal waiting period for these processes may be waived.
Is it possible to refinance my loan under HARP if I am current on my mortgage?
Yes, it is. Homeowners who are current on their payments but have been unable to refinance because their homes have decreased in value may benefit from HARP.
Fannie Mae and Freddie Mac will permit the refinancing of mortgages that they own or that are backed with mortgage securities, whether or not they are current on their payments.
How can I be sure that my loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?
Fannie Mae and Freddie Mac might own or guarantee your mortgage loan. Please ask your mortgage lender or servicer if you are unsure.