What Is a HARP Mortgage & How Did the Program Work?
Understand HARP, a past federal program that helped homeowners refinance mortgages despite negative or limited equity during the housing crisis.
The Home Affordable Refinance Program (HARP) was a federal initiative designed to assist homeowners in refinancing their mortgages. Its primary objective was to help individuals with limited or negative equity secure more affordable mortgage terms, potentially lowering interest rates, reducing monthly payments, or transitioning to a more stable mortgage product.
Understanding the Home Affordable Refinance Program
HARP was established in March 2009 by the Federal Housing Finance Agency (FHFA) in response to the 2008 financial crisis and the downturn in the housing market. Many homeowners found themselves “underwater,” owing more on their mortgages than their homes were worth, making traditional refinancing impossible. The program aimed to help homeowners who were current on payments but had higher interest rates or unstable loan types.
It is important to understand that HARP was a refinance program, not a loan modification program. Loan modifications typically address borrowers struggling to make payments or facing default, while HARP focused on those performing on their loans. The program was specifically for mortgages owned or guaranteed by government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.
Eligibility Criteria for HARP
To qualify for a HARP refinance, homeowners needed to meet specific requirements. The mortgage had to be originated on or before May 31, 2009. Homeowners also needed a responsible payment history: no 30-day late payments in the six months before application, and no more than one 30-day late payment in the preceding 12 months.
The loan-to-value (LTV) ratio of the mortgage had to be greater than 80%, indicating limited or negative equity. While an LTV cap existed initially, later HARP versions removed this limit for fixed-rate mortgages, allowing even those significantly underwater to qualify.
The refinance also had to result in a benefit to the homeowner, such as a lower monthly payment, a shorter loan term, or a switch from an adjustable-rate to a fixed-rate mortgage. Eligible properties included the homeowner’s primary residence, a one-unit second home, or a one- to four-unit investment property. Generally, a homeowner could only use the HARP program once.
The HARP Refinance Process
Homeowners interested in a HARP refinance typically began by confirming if their mortgage was owned by Fannie Mae or Freddie Mac. Both provided online lookup tools for this purpose.
After confirming eligibility, homeowners would contact their current mortgage servicer or another participating lender. While refinancing with a different lender was possible, most servicers participated. The application process involved submitting various documents, including proof of income like recent pay stubs, W-2 forms, and tax returns, along with current mortgage statements.
Lenders would then review the application to ensure it met HARP guidelines and their underwriting standards. The process was designed to be streamlined, often waiving requirements like property appraisals in certain circumstances. Upon approval, the final steps involved signing new loan documents and completing the refinancing of the old mortgage, which could be done at a title company or similar office.
The Program’s Conclusion
The Home Affordable Refinance Program was a temporary measure designed to address a specific economic period. The program officially expired on December 31, 2018.
Following HARP’s conclusion, other refinance options became available for homeowners with high LTVs. These successors include programs like the Freddie Mac Enhanced Relief Refinance (FMERR) and the Fannie Mae High LTV Refinance Option, now known as Refi Possible and RefiNow respectively. HARP helped millions of homeowners refinance their mortgages, contributing to lower housing costs and greater stability.