Editor’s Note: HARP expired 12/31/18. However, Fannie Mae has a current option for High LTV refinances. Read about it here. This post will remain active for archival purposes.
HARP Refinance Is “Not A Scam”, Says Government
The HARP refinance has been a staple of the U.S. housing market recovery, helping more than 3.3 million homeowners to refinance to lower rates since 2009.
Recently, however, HARP loan closings have slowed. Fewer HARP loans closed last year than during any year since the program’s launch.
HARP’s sponsoring agency — the FHFA — believes that the HARP slowdown is an issue of “awareness”, which is probably accurate. Consumers frequently tell officials that the program appears “too good to be true”; that it “must be a scam”.
But, HARP is not a scam. It’s real and thousands of U.S. households remain “in the money” to HARP-refinance right this very minute.
Via an outreach program which includes mailers and town halls, the Federal Housing Finance Agency wants today’s eligible HARP households to get started on their refinances now.
If you’re a current U.S. homeowner and think your mortgage rate is too high for today’s market, it’s a terrific time to take a look at your HARP loan eligibility.
HARP expires in December 2018.
Marketing Tactics To Be Aware Of
Just because HARP isn’t a scam doesn’t mean there are not shady lenders using questionable marketing tactics.
For instance, a popular ad states “Born before 1985? The government will pay off your mortgage.”
In reality, the “Born Before 1985 Mortgage” is likely referencing the HARP program. But HARP doesn’t pay off your mortgage, and you don’t have to be born before 1985 to use it.
Rather, the loan refinances your existing balance into a potentially lower interest rate, thereby lowering your payment.
Eligibility is based on the age of the loan, not the age of the loan holder. If your loan was opened before June 2009 and it is owned by Fannie Mae or Freddie Mac, you are likely eligible.
But don’t let misleading ads turn you off to HARP. It is in fact a government-sponsored program that can save you money monthly and over the life of your loan.
HARP Refinance: Loans For Underwater Homeowners
HARP is an acronym. It stands for Home Affordable Refinance Program.
Sometimes called the “Obama Refi”, the HARP program was launched in 2009 as part of that year’s economic stimulus program.
At the time, current mortgage rates had been dropping and so were U.S. home values.
30-year fixed-rate mortgage rates had moved to the high-4s, opening refinance opportunities nationwide. Unfortunately, many homeowners — including those in Los Angeles, California; Miami, Florida; and Phoenix, Arizona — found themselves unable to refinance.
As home values cratered late last decade, many homeowners had too little equity to refinance.
That’s when the Home Affordable Refinance Program was first proposed.
Via a series of economic stimulus programs, the government promoted the idea that if homeowners who had lost home equity could only get access to a refinance, they could capitalize on low rates and lower their monthly mortgage payments.
With an increase in household cash flow, consumer spending would get a boost which, the government reasoned, would help propel the U.S. economy into a recovery.
When HARP was passed, its guidelines stated that a homeowner’s home equity was irrelevant for purposes of a refinance. So long as the consumer met several basic criteria, including a history of on-time payments, the existing loan would be HARP-eligible for lower mortgage rates.
The most popular headline regarding HARP read “Obama Waives Refi Requirements“.
The program was an instant hit.
HARP 2 : Removing 125% LTV Restrictions
When HARP first launched, it was expected to reach 7 million U.S. homeowners.
It was clear within the program’s first two years, though, that HARP would fail to reach its target.
One of the reasons HARP fell short was that the government asked banks to underwrite HARP loans in a similar manner as a streamlined refinance, but then held the banks responsible for whatever mistakes the loan’s previous lender may have made on the same loan.
For example, if Wells Fargo was making a HARP loan to an existing Bank of America customer, Wells Fargo would be accountable if Bank of America’s failed to properly verify the customer’s income; or if Bank of America issued a loan approval “by accident”.
Banks were scared by this clause. Rather than risk another bank’s “bad underwrite”, then, lenders chose to restrict HARP loans to their existing customer base only.
Loans like these came to be known as “same-servicer” HARP loans. The lack of “cross-servicer” loans hindered HARP’s progress, and suppressed total loan volume.
A second reason HARP was falling short was because the program restricted HARP loans to homes with an LTV of 125% LTV or less.
The LTV restriction prevented homeowners in hard-hit states such as Nevada and Florida from using HARP because many had negative-equity positions greater which exceeded what HARP would allow.
After two-plus years of HARP, then, in an effort to make HARP “better”, the government re-released the Home Affordable Refinance Program as “HARP 2.0”.
There were two main changes in HARP’s second release :
- New mortgage lenders were indemnified from errors of the original lender
- All loan-to-value restrictions were removed; 125% LTV was no longer a limit
The changes to HARP gave U.S. homeowners access to unlimited LTV loans, plus every HARP-participating lender. HARP volume tripled in the next 12 months.
As of today, more than 3.3 million Home Affordable Refinance Program loans have been closed for U.S. homeowners on a mix of primary residences, second homes, and investment properties.
The HARP program expires December 31, 2018. HARP will no longer be available after that date.
What Are Today’s HARP Mortgage Rates?
The HARP mortgage program expires at the end of 2016. If your existing mortgage rate is above today’s rates and your home has lost value since purchase, you may be HARP-eligible.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.