What Is a HARP Refinance and Who Was Eligible?
Uncover the details of the HARP program, a key federal effort that provided mortgage refinancing relief to homeowners with negative equity.
The Home Affordable Refinance Program (HARP) was a federal initiative established in March 2009 by the Federal Housing Finance Agency (FHFA) in response to the 2008 financial crisis and the subsequent downturn in the housing market. Its primary purpose was to assist homeowners who found themselves with “underwater” mortgages, meaning they owed more on their homes than the properties were worth. This program aimed to provide a pathway for these individuals to refinance their loans, even when traditional refinancing options were unavailable due to their diminished home equity. The program was designed to offer relief and promote stability for homeowners struggling with the economic repercussions of the housing market collapse.
Defining HARP Refinance
The Home Affordable Refinance Program, or HARP, was a specific government-backed program designed to address a critical issue in the housing market. It permitted eligible homeowners to refinance their mortgages even if they had little to no equity, or even negative equity, in their homes.
HARP was distinct from conventional refinancing options because it specifically targeted borrowers who could not refinance through traditional means. Lenders typically require a certain amount of home equity for a refinance, making it impossible for “underwater” homeowners to access lower interest rates or more stable loan terms. The program bypassed these conventional equity requirements.
Eligibility for HARP
To qualify for a HARP refinance, homeowners needed to meet several specific criteria. The mortgage had to be owned or guaranteed by either Fannie Mae or Freddie Mac. This was a foundational requirement, as the program was a collaborative effort with these government-sponsored enterprises.
The original mortgage must have been originated on or before May 31, 2009. This cutoff date ensured that the program targeted loans taken out before the full impact of the housing market downturn was realized. Borrowers also needed to demonstrate a responsible payment history. Specifically, they could not have any 30-day late payments in the past six months and no more than one 30-day late payment in the past 12 months.
A significant criterion was the loan-to-value (LTV) ratio, which had to be greater than 80%. Furthermore, the property could not have been previously refinanced under HARP, with a narrow exception for some Fannie Mae loans refinanced between March and May 2009.
Key Features of HARP
The HARP program incorporated several unique features that enabled it to achieve its objectives for homeowners with diminished equity. One notable aspect was the ability to refinance with very high loan-to-value (LTV) ratios. Initially, the program allowed LTVs up to 125%, and under HARP 2.0, this cap was removed entirely for fixed-rate mortgages, meaning homeowners deeply “underwater” could still qualify.
The program also streamlined the refinancing process by potentially reducing documentation requirements. For certain borrowers, HARP 2.0 allowed for less extensive income verification and, in some cases, waived the need for a new home appraisal. These allowances helped to reduce the cost and complexity of refinancing, making the process more accessible for struggling homeowners.
Current Refinancing Landscape
The Home Affordable Refinance Program officially concluded on December 31, 2018. The program ultimately ended because it had largely served its intended purpose, assisting millions of homeowners, and the housing market had recovered significantly from its post-2008 lows.
While HARP is no longer available, other options exist for homeowners seeking to refinance, particularly those with high loan-to-value ratios. Fannie Mae and Freddie Mac have introduced new programs. These include Freddie Mac’s Enhanced Relief Refinance (FMERR) and Fannie Mae’s High LTV Refinance Option, also known as HIRO. These programs aim to provide similar relief by allowing eligible borrowers to refinance into more stable mortgages, often with reduced interest rates or shorter terms, even if they have limited equity. Homeowners can also explore traditional refinancing products, such as FHA, VA, and conventional loans, depending on their specific circumstances and equity position.