Home Affordable Refinance Program, also known as HARP Loans, HARP 2.0 or HARP Refinance Program, is a federal program of the United States. It was set up by the Federal Housing Finance Agency in March 2009 to help underwater and near-underwater homeowners refinance their mortgages. Unlike the Home Affordable Modification Program (HAMP), which aims to assist homeowners who are in danger of foreclosure, this program targets homeowners who are current on their monthly mortgage payments but are unable to refinance due to dropping home prices in the wake of the U.S. housing market correction.
Millions of homeowners found themselves in a difficult predicament after the U.S. housing bubble burst in 2006. As inventories soared nationwide, home prices plummeted. Many new homeowners saw the value of their homes drop below the balance of their mortgages, or nearly so. Later, these same homeowners were prevented from taking advantage of lower interest rates through refinancing, since banks traditionally require a loan-to-value ratio (LTV) of 80% or less to qualify for refinancing without private mortgage insurance (PMI).
Take for example a house that was purchased for $160,000 but is now worth $100,000 due to the market decline. Further, assume the homeowner owes $120,000 on the mortgage. In this scenario, the loan-to-value ratio would be 120%, and if the homeowner chose to refinance, he would also have to pay for private mortgage insurance. If the homeowner was not already paying for PMI, the added cost could nullify much of the benefit of refinancing, so the homeowner could be effectively prohibited from refinancing.
HARP Refinance Program
In December 2011, the rule the Home Affordable Refinance Program (HARP) was changed yet again, creating what is referred to as “HARP 2.0“; there would no longer be any limit on negative equity for mortgages up to 30 years – so even those owing more than 125% of their home value could refinance without PMI. Also, the program was expanded to accept homeowners with PMI on their loan. Finally, any new mortgage lender was guaranteed not to be held responsible for fraud committed on the original loan. This greatly expanded the willingness of lenders to participate in the program.
How HARP 2.0 Can Help You
- Take Advantage of historically low interest rates
- Lock in rate and payment for the life of your loan
- HARP is available to homeowners with 2nd mortgages
- Mortgage Insurance may not be required
- All occupancy types are eligible
- All Property types are eligible
- No Pre-Payment penalties.