Editor’s Note: HARP expired 12/31/18. However, Fannie Mae and Freddie Mac recently rolled out new High LTV refinances. Read about them here. This post will remain active for archival purposes.
There’s been little talk of HARP 3 lately, but that doesn’t mean that program is stalled.
The rumored HARP upgrade was conceptually introduced by the President; backing the idea that “every responsible homeowner” should be able to refinance to today's mortgage rates.
low In some form, HARP 3.0 is expected to pass, it’s just unclear when. The government is calling the program “A Better Bargain For U.S. Homeowners“.
In Brief : The HARP Refinance Program
Home Affordable Refinance Program (HARP) is a government-backed refinance program. It was launched in 2009 as a means to stimulate the economy. At the time, mortgage rates were falling but few homeowners were able to refinance because they had lost too much equity in their respective homes.
HARP waived certain loan-to-value requirements, and close to 1 million U.S. households took advantage.
Then, in 2012, the HARP program was expanded.
Dubbed HARP 2.0, all loan-to-value requirements were waived with the new release, as were proof of income requirements; proof of asset requirements; minimum credit score requirements; plus, as a host of other qualifiers.
In many cases, HARP 2.0 won’t require home appraisal.
The retooled HARP 2.0 was specifically designed to remove refinancing hurdles which existed under the program’s initial iteration. Consider HARP’s three basic requirements :
- To use HARP, you must have less than 20% equity in your home
- To use HARP, you must have paid your loan on-time for the last 6 months
- To use HARP, your loan must have a note date of no later than May 31, 2009
There’s a fourth requirement, too — HARP requires that your mortgage be backed by either Fannie Mae or Freddie Mac. This clause specifically affects the millions of underwater U.S. homeowners whose mortgages are privately-held.
With HARP 3, that requirement may be no longer. Soon, even homeowners with existing Alt-A, jumbo and sub-prime loans could find themselves HARP-eligible.
HARP 3 : Help For Non-Fannie, Non-Freddie Mortgages?
HARP 3.0 is not yet passed but it makes for some interesting talk. HARP 3.0 would likely help homeowners whose mortgages are specifically not backed by Fannie Mae or Freddie Mac.
This is a big deal because, although the Fannie Mae-Freddie Mac-FHA triumvirate controls more than 90% of today’s new mortgage originations, that wasn’t the case from 2001-2007. Last decade, non-GSE lending was a major part of the U.S. housing market.
For example, Federal Reserve data shows that Alt-A mortgages accounted for 27.5% of mortgage originations in 2005. Today, by current rules, each of these homeowners is locked out from the Home Affordable Refinance Program.
HARP 3 would allow these Alt-A customers to (finally!) refinance their home loans.
In addition, there were lots of “A Paper” mortgages that went to sub-prime investors last decade because, at the time, the sub-prime market offered lower mortgage rates than the conforming market did. Ludicrous, but true.
Conforming, 30-year fixed rate mortgage rates were 5.50 percent in mid-2005. Sub-prime 30-year fixed rates, by contrast, were a quarter-point lower at 5.25%. Which would you have taken?
Homeowners with sub-prime mortgages may become HARP-eligible, too.
And, lastly, HARP 3.0 could help homeowners with jumbo mortgages that, in today’s market, would not be jumbo mortgages.
Last decade, before conforming loan limits were raised to $625,500 in “high-cost areas” throughout California, Virginia, Maryland, and New York, for example, homeowners who bought or refinanced were relegated to non-conforming loan products — loans that met typical underwriting guidelines but that were too big for Fannie Mae or Freddie Mac to purchase.
After home values fell, although their mortgages met Fannie Mae loan standards; and, although their mortgages were within Fannie Mae loan limits, these homeowners were unable to use HARP 2.0 because their mortgages weren’t backed by the government. They were held by a bank, such as Wells Fargo, CitiMortgage, Chase, or Bank of America.
With HARP 3, these “high-cost”, jumbo homeowners would get the chance to refinance.
HARP 3 Candidates
We don’t know when HARP 3.0 will be made official (if ever). Nor do we know which homeowners will qualify for HARP 3 when it’s passed. However, based on HARP history and talk from Washington, D.C., we can make a few good guesses.
Some of the “borrower types” HARP 3.0 is expected to target include :
- A self-employed person who used stated income loan for the original mortgage, and can verify their current income via federal tax returns
- A “prime” borrower who used a sub-prime mortgage because mortgage rates were lower and/or fees were less as compared to a conforming one
- A jumbo mortgage homeowner who lives in a “high-cost area” whose original mortgage was for between $417,000 and $625,500
- A wage earner who used a stated income and/or stated asset mortgage for convenience
- Sub-prime borrower who has paid mortgage as agreed and can verify income and assets
- An Alt-A borrower whose FICOs were low at date of origination, but have since improved
There are literally millions of U.S. homeowners who would meet HARP 3.0 eligibility standards, which would open today’s low mortgage rates to all of them.
Compare HARP Mortgage Rates
HARP 3 is an interesting product. It would be the extension of HARP 2.0 for homeowners whose mortgages are private-market money — either because non-government loans were cheaper, or because no suitable government product existed.
So, whether you’re a HARP 2.0 candidate, HARP 3.0 candidate, or just want to see today’s mortgage rates, get started now. HARP mortgage rates are comparable to non-HARP rates, there is no obligation to proceed,and no social security number required to get started.
Click here to get HARP mortgage rates.