Will Harp 3.0 Legislation Pass In 2014? (Millions Anxiously Await)

By James Young on February 27, 2014
Will Harp 3.0 Legislation Pass In 2014? (Millions Anxiously Await)

Home values have continued to rise, but there are still millions of homeowners unable to refinance because their properties lost too much value during the housing market meltdown of a few years ago.

If you are one of those millions, help could be available to you through one of the best-kept secrets among government housing programs: the Home Affordable Refinance Program (HARP). If you haven’t heard of HARP, you aren’t alone.

Evolution of HARP Assistance

The current HARP program, known as HARP 2.0, targets homeowners who are up-to-date on their mortgage payments, but have been unable to leave predatory mortgage situations behind. Their home’s value plummeted during the economic crisis and now they are unable to secure traditional refinancing. The HARP program’s goal is to help such homeowners achieve a new, more affordable and stable mortgage—something that had seemed far out of reach before the program came along.

But that doesn’t mean it’s been smooth sailing for HARP from the start. HARP and other mortgage modification programs were first introduced in 2009, but the help they provided was extremely limited. An analysis in early 2011 found 54.3 percent of an estimated 1,426,833 proposed mortgage modifications ended up failing in the end. Despite assistance, more than half fell back into foreclosure.

Help had arrived with the introduction of HARP 2.0 in March 2012. The new version was launched after major reconfigurations by the White House and federal regulators driven by Fannie Mae and Freddie Mac. The program emerged vastly improved, though still lacking on some fronts.

Mortgage Savings

Through the revised HARP 2.0 program, an estimated 3 million homeowners have now been able to refinance their loans, including about 900,000 who were underwater with their homes.

A study by Fannie Mae showed borrowers taking advantage of HARP saved an average of $328 per month compared to their previous mortgage payment. The program enabled home owners to walk away from a wide assortment of adverse situations, such as interest-only mortgages, teaser rates, adjustable-rate interest-only loans and other predatory lending circumstances.

In addition to those who have already taken advantage of the program, it’s estimated that another half million or so borrowers are eligible to take advantage of the current program, which is set to sunset by Dec. 31, 2015.

Program Eligibility

The HARP refinance procedure is relatively straightforward, requiring the expected loan application and underwriting process.

To be eligible for HARP 2.0 assistance, you must be up-to-date on your payments. In addition, the following criteria apply:

  • You loan must be backed by Fannie Mae or Freddie Mac. This can be determined by visiting http://www.makinghomeaffordable.gov/tools/does-fannie-or-freddie-own-your-loan.
  • Your mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • This must be your first time taking advantage of HARP. The only exception is if you had a Fannie Mae loan refinanced under early versions of HARP, between March and May 2009.
  • Your current loan-to-value (LTV) ratio must be greater than 80 percent.
  • You must work with a lender that is approved by Fannie Mae or Freddie Mac, and that participates in HARP.

Once you know you meet the criteria for the program, it’s best to compare rates and costs across multiple mortgage companies to be sure you achieve the best refinance terms for your particular situation.

HARP 2.0 Program Challenges

While HARP has helped over 3 million home owners, it is not without its shortcomings. First, even when borrowers successfully met Fannie Mae and Freddie Mac guidelines, they often found it difficult to locate a lender who would approve a HARP 2.0 loan.

Second, if a loan was not owned by Fannie Mae or Freddie Mac, it did not qualify for the current HARP program at all.

These two significant challenges have fueled support for creating a new and improved version of HARP legislation. There are some who believe this would best be done through an entirely new piece of legislation, or HARP 3.0, that would target borrowers with loans originating before June 1, 2009, and not be constrained to working only with loans owned by Fannie Mae or Freddie Mac.

Unfortunately, talk has not resulted in action, at least not to date.

New Director, New Hope

With the changing of the guard at the Federal Housing Finance Agency, there had been renewed hope that there will be a stronger push for some type of HARP 3.0 in 2014. The new director, Mel Watt, was expected to be more aggressive in pursuing HARP 3.0 program proposals. 

However, in remarks made January 22, Michael Stegman, the top housing policy advisor at the Treasury Department, said his Department believed there should be no change in the HARP eligibility date.

While FHFA Director Watt has not made public any plans regarding changes he might make to HARP, it is likely he will not break from the partisan position stated by Stegman. That means any tweaks to the program are not likely to involve Congress and hope for substantial changes is beginning to fade.

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About James Young

My name is James Young- I love red wine, sailing, and playing guitar. I believe that everyday is truly a gift. I'm blessed to live five minutes from the sand in the beautiful city of Long Beach, CA. When I'm not assisting homeowners, you'll find me belting melodies with friends around a campfire, wandering the halls of an art exhibit, or watching ESPN re-runs until the sun comes up. So what am I doing here, you might ask? In a couple of sentences- I'm passionate about empowering first-time and experienced home buyers to make their dreams a reality. Whether it's saving thousands on your home loan, buying your first home, or acquiring your first investment property, I'm always here to help. Don't hesitate to ask questions, and please remember to "share the love"! :) #loveloans #loverealestate #lovelife!