THE HISTORY OF HARP
Since 2007, when the American housing bubble burst, untold numbers of homeowners have found themselves in the dire dilemma of seeing the value of their homes sink below the amount they owe on their mortgages, putting them “under water” in mortgage jargon. With most mortgage lenders requiring a loan to value ratio (LTV) of 80% or less on refinancing (not requiring private mortgage insurance [PMI]), these homeowners have been basically locked out from taking advantage of the record low interest rates. Seeking solutions, the Federal Housing Finance Agency (FHFA) introduced the Home Affordable Refinance Program (HARP) in March 2009 thus began the history of HARP.
WHO QUALIFIES FOR HARP?
HARP was designed to help homeowners obtain refinancing when the value of their home exceeded 80% LTV without having to pay the additional PMI costs. Originally, this program was intended for homeowners with 105% LTV mortgages or less. This cap was subsequently lifted to 125% LTV later that year (2009), and subsequently, in October 2011, the cap was eliminated altogether, probably in response to the fact that home prices all over the country were still on a downward path. The 2011 HARP update was also designed to increase the number of Americans that will qualify for the government loan money.
However, the following conditions listed below still have to be met in order for you, a homeowner to qualify for a HARP refinance:
- Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. This is a big source of confusion for many homeowners since neither lending agency deals directly with the public. If in doubt whether your particular qualifies, you can visit the Fannie Mae or Freddie Mac websites and use their Loan Lookup Tools.
- Your mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- Your mortgage also had to have been secured on or before March 31, 2009. The reasoning behind this being that after this date mortgages already had lower interest rates.
- The current loan-to-value (LTV) ratio on your mortgage must be greater than 80%.
- You must be current on your mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
- Only individual homeowners can qualify for HARP, as this program does not extend to companies or any other legal entities.
- Homeowners also must benefitfrom HARP either by (1) receiving lower monthly mortgage payments or (2) by switching to a more stable mortgage (i.e., from an adjustable rate mortgage to fixed rate mortgage).
OTHER HARP CONSIDERATIONS
And these are just the primary eligibility requirements. There are others. Therefore, it is imperative that homeowners seek the help of professionals who are well versed in the demanding and fairly complicated HARP loan process.
As you can see, the history of HARP is still evolving and subject to future changes. For now, HARP is due to expire on December 31, 2013, but if housing market conditions continue to decline, then hopefully the Federal Housing Finance Agency (FHFA) will continue to adjust to the new circumstances. Presently, a nice feature of HARP is that homeowners can avoid paying for an appraisal if a reliable automated property valuation model, such as Zillow, is available for your particular area, subject to the mortgage servicer’s discretion of course.
The significant changes in HARP eligibility requirements announced by President Obama in October 2011 have led mortgage industry insiders to dub it HARP 2.0, even as the history of HARP is little more than two and a half years old. The Mortgage Bankers Association has previously estimated that $900 billion in mortgages will be originated in 2012 but with HARP 2.0 fast becoming effective, this number will certainly rise. Unfortunately, HARP was not designed to help homeowners already in foreclosure proceedings or in danger of being foreclosed upon.
The HARP mortgage application process can take a few months to complete and therefore, it is strongly advisable that homeowners who feel they may qualify for the HARP program should seriously consider contacting professionals who can efficiently guide them along the long and laborious process of refinancing under HARP 2.0. The history of HARP is by no means over yet and it will take professionals to keep track of developing changes in the process.