Posted June 15, 2014Tweet
The Home Affordable Refinance Program (HARP) has reached more than 3 million households in its first 4 years. However, the program has not reached as many U.S. homeowners as it should.
The limited reach of HARP has two potential causes. The first is that the program may be too restrictive; too few people qualify. The second is that too few people choose to apply.
There are millions of HARP-eligible households nationwide. Today's mortgage rates would save many of them tens of thousands of dollars.
In 2009, the government launched its Home Affordable Refinance Program (HARP) as part of that year's economic stimulus program. HARP was meant to give homeowners access to a refinance despite having little or no home equity.
The eligibility test for HARP was basic.
In order to qualify for HARP, homeowners had to show their current mortgage was backed by Fannie Mae or Freddie Mac on, or prior to May 31, 2009; that their mortgage payment history was strong; and that their home's loan-to-value was 125% or lower.
Between 2009-2011, HARP reached close to one million households. It would have reached more than one million households, it was determined, if not for the 125% loan-to-value restriction, and for a specific HARP clause which increased a mortgage lender's typical mortgage liabilities.
So, to reach more households, HARP 2.0 was released.
HARP 20 was an improvement upon HARP 1.0. It removed the 125% loan-to-value restriction which helped homeowners in hard-hit states such as Florida, Nevada and California get access to the HARP program. It also removed the lender liability clause which had slowed HARP's adoption.
Program changes were a hit. HARP 2.0 closed as many loans in its first 12 months as the original HARP 1.0 closed in its first three years.
However, even today, HARP is closing fewer loans than it should. HARP misconceptions are limiting the program's reach.
The government is going on the offensive.
Fannie Mae and Freddie Mac recently launched a HARP public relations campaign meant to educate U.S. homeowner about the HARP program's benefits. The agencies believe that the majority of HARP-eligible homeowners are either unaware that the program exists, don't know about the program benefits, or both.
This website receives a lot of emails from homeowners wondering about HARP and whether they're eligible to refinance. Here are some of the common HARP misconceptions.
Yes, you can refinance with HARP if you have a second mortgage. However, in accordance with HARP guidelines, you cannot combine your two mortgages in a cash-out refinance.
To refinance your first mortgage via HARP, but leave your second mortgage unchanged, your second mortgage lender will agree to subordinate its mortgage, which is a fancy way of saying that second mortgage lender will give permission for you to replace the existing first lien on title.
Yes, you can refinance your home via HARP if you have no equity. That's exactly the premise of the program! Via HARP 2.0, homeowners can refinance no matter how far underwater they are with their mortgage. This is among the reasons why the HARP refinance has been so popular in Las Vegas, Nevada; Phoenix, Arizona; and other hard-hit areas. HARP is the "underwater mortgage program" -- of course you can use it when you have no home equity.
Even if you've been turned down for HARP in the past, it can make sense to apply for HARP again. This is because HARP-approved lenders often use in-house variations of the official, government-issued HARP guidelines. These variations differ from bank-to-bank. If you were turned down by Wells Fargo, for example, you may be able to get approved by Quicken. If at first you don't succeed, apply, apply again.
HARP 2.0 can be used to refinance homes of any occupancy type. Investment properties can be refinanced via HARP, and so can second homes and vacation properties. HARP can be used in all 50 states, the District of Columbia, and all U.S. territories.
Not all lenders offer The Home Affordable Refinance Program; this is true. However, U.S. homeowners are free to refinance with any HARP-approved lender. This freedom was among the improvements of HARP 2.0. There are thousands of lenders making HARP 2.0 mortgages. You can get mortgage rates for a HARP loan here.
The HARP refinance program is not meant for homeowners who are behind or delinquent with their mortgage payments. HARP can only be used for homeowners who are current. The HARP program is not meant to save a person's home from foreclosure. Homeowners facing difficulty with payment should contact their loan servicer immediately.
You can use HARP 2.0 for loans with existing private mortgage insurance (PMI). This is a change from HARP 1.0 and applies to loans with both borrower-paid mortgage insurance (BPMI) and lender-paid mortgage insurance (LPMI). However, it can be difficult to find banks to offer a PMI program. If you try to refinance your loan with PMI and you are turned down by a lender, apply again somewhere else. You may get a better outcome.
There are an estimated remaining 4-plus million households nationwide who could refinance via HARP, but haven't. Some of these 4 million households are unaware that HARP 2.0 exists. Others are unaware that they'd qualify.
Check whether you'd qualify for HARP 2.0 and see today's mortgages. Get started online. It's fast, and free, and there's no obligation.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.