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.
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.
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.
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:
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.
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.
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.