HARP Refinance: Homeowners Rush To Apply Ahead Of Expiration

June 27, 2016 - 4 min read

HARP Was The First “Underwater” Refinance

The HARP loan program revolutionized refinancing.

Before the existence of this loan, a homeowner needed 10-20% equity in their home to get into a lower mortgage rate.

Then the Home Affordable Refinance Program (HARP) was created. To date, more than 3 million homeowners have reduced their rate and payments even though they were underwater on their mortgage.

But the days of HARP are almost gone. The program expires December 31, 2016.

If you’re one of the many homeowners with an underwater mortgage owned by Freddie Mac or Fannie Mae, there’s still time to reduce your interest rate.

But to obtain an interest rate in the 3s or lower, you may want to move quickly.

Only a few months remain for HARP, and these loans may become unavailable long before the official cutoff date.

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Lenders May Stop Offering HARP Within Months

Although HARP isn’t scheduled to expire until December 31, 2016, the end may be closer than most people think.

It’s likely that many lenders will stop offering HARP loans well before the deadline to ensure that all existing applications make it through their pipelines on time. For this reason, eligible homeowners should make it a priority to qualify for the loans this summer.

The Obama Administration introduced HARP in 2009, in the wake of the economic downturn, to help financially challenged homeowners stay in their houses and avoid foreclosure.

The program was designed to lower payments on underwater mortgages — loans worth more than the value of the underlying property. Homeowners were encouraged to take advantage of rates that were hitting all-time lows. Many received, and are still receiving, 15-year fixed-rate loans in the 2s.

In the seven years since the creation of HARP 1.0 and the more lenient HARP 2.0, the loan has helped more than 3.3 million Americans reduce their housing costs.

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More Than 300,000 Homeowners Can Still Benefit

For reasons that remain unclear, however, an estimated 325,000 eligible homeowners have yet to take advantage of the program. According to experts, some Americans haven’t applied for HARP loans because they are unaware of the program, while others are harboring misconceptions about the nature and size of the benefits.

Other overestimate the difficulty of the application process.

In fact, many applicants who’ve undergone the process have been surprised at its speed and simplicity. Many homeowners are not even asked for an appraisal.

And homeowners paying interest rates of 4.5 percent or higher will probably see substantial savings by refinancing their homes with a HARP loan. With mortgage rates today in the mid-3s, you can have a very low rate already, and still lower your payments.

From the beginning, federal government officials were surprised that more people didn’t apply for HARP loans. By 2011, just 900,000 homeowners had refinanced through HARP. To boost participation, the government relaxed the eligibility requirements.

The revised program is came to be known as HARP 2.0.

Under the revised rules, borrowers can refinance regardless of how far the value of their houses has fallen.

HARP 1.0 set an underwater limit of 125 percent. If your home was worth $100,000, you could not get a loan amount greater than $125,000. This was not helpful for someone who owed $200,000 on their home that was worth half that much.

Now, a homeowner whose home is worth $100,000 could refinance their mortgage worth two or three times that amount.

In addition, the new guidelines eliminated certain risk-based fees previously charged to homeowners, loosened the income verification restrictions and, for most homeowners, waived the requirement that they have their homes appraised and get their mortgage loans insured.

HARP 2.0 turned out to be one of the most successful refinance mortgages in history.

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Check Your HARP Eligibility

HARP has a couple different names according to who is offering it. Either way, basic guidelines are the same.

The Fannie Mae version is called DU Refi Plus. Freddie Mac’s is called a Relief Refinance. Which one you receive depends on whether your current loan is owned by Fannie or Freddie. Your lender will look up your current loan in each agency’s database.

The following are the up-do-date HARP eligibility guidelines, no matter which HARP type you receive.

  • Your current mortgage must be owned by Fannie Mae or Freddie Mac
  • The loan must have closed by May 31, 2009
  • The current loan-to-value must be greater than 80 percent
  • No 30-day late payments during the last six months
  • No more than one payment that was 30-plus days late during the past 12 months
  • Some lenders will require 12 months of on-time payments.
  • You cannot refinance the same property twice with HARP

You should also know that it’s not necessary to obtain a HARP loan through the same bank that issued your original mortgage.

For single-family (1-unit) homes, the maximum HARP loan amount is $424,100 in most areas of the country. In many cases, loan limits are much higher.

A property with multiple units – a duplex, triplex, or four-plex – is eligible for a higher loan amount. Regions of the U.S. with higher loan limits are eligible for “Jumbo-Conforming” or “high-balance” HARP loans. The maximum loan for a single-family home is $636,150, with multi-unit properties carrying even higher limits.

Properties in Alaska, Guam, Hawaii, and the Virgin Islands are eligible for loan amounts that exceed even the highest limits found in the contiguous United States.

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Hopes Are Fading For A Last-Minute Extension

It is possible that the government may extend the deadline for the program. This has already happened twice. However, previous extensions happened earlier in the year.

Homeowners would be prudent not to delay applying for the loan. It is also wise not to count on another set of modifications to the program.

Congress has discussed creating a HARP 3.0 which would let people with non-Freddie Mac or Fannie Mae mortgages qualify. Another proposed version would permit homeowners to refinance the same property twice, or get a new loan on a home purchased after 2009.

But all such talks have stalled. Homeowners who might qualify under current guidelines should apply, even if they have been turned down in the past.

What Are Today’s HARP Rates?

Today’s mortgage rates are low. It’s the perfect time to capitalize on the HARP loan to reduce your rate and payment.

Get a HARP loan quote now. Don’t delay; soon, this flexible loan option could be gone.

Time to make a move? Let us find the right mortgage for you

Pete Gerardo
Authored By: Pete Gerardo
The Mortgage Reports contributor
Pete Gerardo is a business writer whose work has appeared in The New York Times and numerous trade magazines.