The Home Affordable Refinance Program (HARP) was a federal program established in 2009 in response to the subprime mortgage crisis as part of the federal government’s initiative to help struggling homeowners. This program allowed borrowers, who owed more on their mortgages than their home’s current market value (commonly referred to as being “underwater”), to refinance their loans to more affordable terms.
Purpose and Objectives of HARP
HARP aimed to provide relief to millions of homeowners by enabling them to refinance their existing mortgages into more manageable loans with historically low-interest rates, even if they had little or no equity in their homes. By doing so, the program sought to:
- Reduce monthly mortgage payments.
- Lower interest rates.
- Stabilize the housing market.
- Prevent foreclosures.
Eligibility Criteria
To qualify for HARP, borrowers needed to meet specific criteria:
- The loan must have been owned or guaranteed by Fannie Mae or Freddie Mac.
- The mortgage must have been originated on or before May 31, 2009.
- The loan-to-value (LTV) ratio must be greater than 80%.
- The borrower must be current on their mortgage payments, with no late payment over 30 days in the past six months and no more than one late payment in the past 12 months.
Special Considerations
Loan-to-Value Ratios
HARP initially focused on borrowers with LTV ratios up to 125%, but subsequent revisions lifted this cap, allowing regardless of how underwater the mortgage was.
Appraisals and Underwriting
Many HARP refinances did not require an appraisal or extensive underwriting, provided the borrower had a reliable payment history.
Costs and Fees
HARP mandated no minimum credit score requirements, and closing costs could often be rolled into the loan itself, minimizing out-of-pocket expenses for the borrower.
Examples and Case Studies
Example 1: Lowering Monthly Payments
A homeowner with a 6% interest rate mortgage refinanced through HARP to a 4% interest rate, reducing their monthly payment by $200.
Example 2: Stabilization of Market
Widespread use of HARP resulted in a significant number of refinanced loans, contributing to overall housing market stabilization during the economic downturn.
Historical Context
HARP was introduced as part of the Obama administration’s efforts to stabilize the housing market following the 2008 financial crisis. At its inception, many criticized the program for strict eligibility requirements and a slow start. However, subsequent adjustments made it more accessible.
Applicability and Impact
Short-Term Impact
HARP directly helped millions of homeowners reduce their monthly payments and avoid foreclosure, thus bolstering individual financial stability and the overall economy.
Long-Term Impact
Although HARP expired in 2018, it played a crucial role in shaping future mortgage assistance programs and highlighted the need for government intervention in critical financial sectors.
Comparisons: HARP vs. Other Programs
HARP vs. HAMP (Home Affordable Modification Program)
While HARP focused on refinancing underwater mortgages, HAMP aimed at modifying the terms of existing loans to make them more affordable.
HARP vs. FHA Streamline Refinance
Unlike HARP, the FHA Streamline Refinance program targets FHA-insured loans specifically, offering a simplified refinance process but requiring borrowers to pay mortgage insurance premiums.
Related Terms
- Underwater Mortgage: When a homeowner owes more on the mortgage than the home’s current market value.
- LTV Ratio: Loan-to-Value Ratio, a measurement comparing the amount of the mortgage to the appraised value of the property.
- Fannie Mae and Freddie Mac: Government-sponsored enterprises that play a key role in the U.S. housing finance system by purchasing and securitizing mortgages.
FAQs
Q1: Can I still refinance under HARP now?
Q2: What if my loan was not owned by Fannie Mae or Freddie Mac?
Q3: Could I refinance through HARP more than once?
References
- U.S. Department of Housing and Urban Development. (2023). The Home Affordable Refinance Program. Retrieved from HUD.gov.
- Federal Housing Finance Agency. (2023). HARP Program Update. Retrieved from FHFA.gov.
Summary
The Home Affordable Refinance Program (HARP) served as a vital tool for underwater homeowners from its inception in 2009 to its expiration in 2018. By enabling homeowners to refinance their mortgages, HARP helped millions achieve more stable financial footing and contributed to broader economic recovery post-2008 mortgage crisis. While no longer available, HARP’s legacy endures in subsequent mortgage assistance frameworks.
