HARP Program: What Is It and What Are Today’s Alternatives?
After the 2008 financial crisis, the Home Affordable Refinance Program (HARP) helped people who owed more than their home was worth to avoid foreclosure. But, although the HARP program ended a few years ago, there are still options for homeowners who have negative equity in their homes and need to refinance.
What is the Home Affordable Refinance Program (HARP)?
The Home Affordable Refinance Program (HARP) was an assistance program created in 2009 to help homeowners with underwater mortgages. Overseen by the Federal Housing Finance Agency (FHFA), the program provided relief to homeowners who owed more on their mortgage loans than their homes were worth by allowing them to refinance into a more stable home loan product.
This program intentionally offered more lenient qualifying requirements than standard refinance programs – such as allowing for a higher-than-normal loan-to-value (LTV) ratio – which gave homeowners the chance to swap out their existing home loans for something more sustainable.
In total, the HARP program helped refinance an estimated 3.5 million homes before it eventually came to an end in 2017.
Notably, the HARP program was available only to homeowners who had conventional mortgages sold to Fannie Mae or Freddie Mac, as the two government-sponsored enterprises (GSEs) were responsible for this initiative. In addition, during the first phase of the program, the mortgage loan and borrower had to meet the following eligibility criteria:
- The mortgage must have been sold to Fannie Mae or Freddie Mac before May 31, 2009
- The mortgage must have an LTV ratio greater than 80% and less than 125%
- The homeowner must not have been delinquent on their mortgage at all during the six-month period prior to refinancing and have no more than one late mortgage payment during the 12-month period prior to refinancing
- The homeowner must have a credit score of at least 660.
In 2011, the GSEs unveiled a plan for an updated version of the HARP program known as HARP 2.0. This version of the program underwent the following changes:
- It extended the program’s duration
- It removed the 125% ceiling for LTV ratios
- It removed the previous requirement for lenders to perform a manual home appraisal
Behind on your mortgage? Here’s what you need to know about refinancing with late payments.
How to tell if your mortgage is underwater
Here are two signs that you may owe more on your home loan than your home is worth:
- Falling property values: If home values have fallen substantially since you first bought your property, there is a good chance you could have negative equity in your home. However, whether you’re underwater will depend on a number of factors, including how much property values have fallen and how much home equity you have at the moment.
- Missed mortgage payments: When you pay your monthly mortgage payment, that payment gets applied to both the principal loan amount and accrued interest charges. That interest doesn’t stop accruing if you miss payments, which could lead to you being upside down on your home loan over time.
Alternatives to the HARP program
Although the HARP program ended a few years ago, there are still options available to you if you’re underwater on your mortgage and are looking to refinance or receive relief.
These include:
Fannie Mae RefiNow™
This relatively new Fannie Mae RefiNow program allows you to refinance your current Fannie Mae mortgage with up to a 97% LTV ratio, no minimum credit score and a debt-to-income (DTI) ratio as high as 65% when the standard maximum is 50%. However, the RefiNow program sets income limits and requires an appraisal in most cases. Some borrowers may be eligible for an appraisal waiver or a $500 credit toward the appraisal cost at closing.
Freddie Mac Refi Possible®
There’s not much difference between this program and the Fannie Mae RefiNow loan, except that the Refi Possible option is meant for loans owned by Freddie Mac. This refinance program has a maximum 97% LTV ratio and a DTI ratio as high as 65%, as long as your income is within the program limits. A $500 credit is also offered toward appraisal costs.
Mortgage forbearance
If you’re experiencing a temporary financial hardship, a job loss or income reduction, you may qualify for a mortgage forbearance. Under forbearance, your loan servicer allows you to reduce or suspend your monthly mortgage payments for a set time period, such as six or 12 months. Once the forbearance period ends, you’ll negotiate a repayment plan to make up any missed payments.
Mortgage modification
If you’ve missed mortgage payments, your lender may offer you the chance to do a mortgage modification. With this option, you simply modify the terms of your current loan instead of refinancing into a new one. For example, you could extend your repayment term or lower your mortgage rate in an attempt to make payments more affordable.