The Home Affordable Refinance Program Demystified


It was in 2008 when the bursting of the housing bubble finally happened. Since then, the prices of real estate have gone down, leaving nearly one in six U.S. homeowners owing more in mortgage payments than their house is worth according to the Wall Street Journal. Moody’s also reported that that the housing slump has pushed the values of selected areas down for as large as 30%, leaving 12 million households, or about 16%, underwater.


This shocking turn of events in the economy has left many in default, resulting in foreclosures and short sales, while others still struggle to make ends meet. In response to this crisis, the United States Government launched the Home Affordable Refinance Program or HARP in the effort to assist homeowners with timely mortgage history but who are unable to seek refinancing because of lowered real estate valuation.


What is The HARP? And How Can It Help?


The HARP, also known as Home Affordable Refinance Program was made during the Obama administration. It allows borrowers to refinance into a 30 or 15 year fixed rate loan even if they owe more in mortgages than the worth of their homes. The advantage of the HARP program is that they do not require that the equity or value of the property is higher than the mortgage balance.


Traditionally, this is the requirement of finance banks or lenders. Before the HARP program was introduced, underwater home owners did not have any solution to their mortgage problems.


There are several qualifications in order to participate with the HARP. These qualifications include:


  • The home must be a primary residence
  • The borrower does not have a VA, USDA or FHA loan
  • The borrower must have a mortgage loan that is securitized or owned by Freddie Mac or Fannie Mae
  • The borrower must be current in mortgage payments, and must not have made a late payment of more than 30 days in the past year.
  • The borrower owes more than what the house is worth, and the mortgage does not exceed 125 percent of the current market value of the house.
  • The refinancing will consequently improve the long-term stability and affordability of the borrower’s mortgage
  • The borrower must have sufficient income to pay the new loan terms.


 Be reminded that if you do qualify for a refinance under the HARP Program, you will still need to submit a loan application. Plus, there are refinance fees to consider.


Features of the HARP Program


There are several features of the HARP Program that make it more agreeable than traditional refinancing. These features include:


  • Lower closing costs than a mortgage refinance from a bank
  • More lenient underwriting
  • Sometimes an appraisal is not required
  • It is possible to get low mortgage rates that are comparable to conventional loans
  • For those with loans owned by Freddie Mac, you may not be required to show proof of income.
  • There is no mortgage insurance needed.
  • For those who have a Fannie Mae loan, all closing costs may be included in the mortgage except for the credit report fee and appraisal fee if required.
  • HARP loans don’t require upfront cash.


Changes Made to the HARP Program


Just last October, the Federal Housing Finance Agency with Fannie Mae and Freddie Mac announced a series of changes to the HARP program in an effort to attain more eligible borrowers who can benefit from refinancing their home mortgage. Below are the key aspects of the recent changes made to the HARP.


  • The elimination of certain risk-based fees for borrowers who refinance into shorter-term mortgages, plus the lowering of fees for other borrowers.
  • The removal of the current 125% loan to value ceiling for their fixed-rate mortgages which are backed by Freddie Mac and Fannie Mae
  • The waiving of certain warranties and representations that lenders engage in making loans owned or guaranteed by Fannie Mae or Freddie Mac.
  • Elimination of the need of new property appraisal when there is a reliable automated valuation model estimate provided by the Enterprises.
  • Date extension of HARP deadline to December 31, 2013 for loans that were originally sold to the Enterprises on or before May 31, 2009.


By eliminating some fees, more borrowers can use HARP to refinance their short-term mortgages, while borrowers who are underwater will be able to reduce the balance that they owe much faster if they take advantage of the low interest rates that are being offered today.


Frequently Asked Questions


  • What happens to borrowers who have loans that are not owned or guaranteed by Freddie Mac or Fannie Mae?
    • Unfortunately, neither the Enterprises or FHFA have the legal authority to extend the HARP to borrowers whose mortgages were not guaranteed or owned by Fannie Mae or Freddie Mac.


  • What can borrowers do to take advantage of the HARP?
    • The first thing that borrowers can do is to find out if his mortgage is owned or guaranteed by Freddie Mac or Fannie Mae by visiting the website. If it is so, the borrower should then contact his existing lender or any other mortgage lender who is offering HARP refinancing.
  • Is there a maximum loan to value ratio for HARP?
    • There is no more maximum loan to value limit. If the borrower wants to refinance under HARP and their new loan is a fixed rate mortgage, there is no maximum LTV. However, for those whose new loan is an adjustable rate mortgage, the LTV should not be above 105%.
  • Are condominium mortgages eligible for HARP Refinancing?
    • Yes, condominiums are eligible under HARP
  • When will appraisals not be required?
    • When there is a reliable automated valuation model estimate available, a new appraisal will not be required.
  • When will these changes become available?
    • Availability will depend upon the mortgage lender. Some lenders may accommodate mortgage application using the new enhancements, while others may take a longer time.


For those who have been seeking a solution for expensive mortgage payments because of high interest rates, the HARP program may be the solution to your problems. Not only does it accept those who have underwater mortgages, but it also gives affordable rates that will help you save on your mortgage.


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