What Was the HARP Mortgage Program & What Replaced It?

The Home Affordable Refinance Program (HARP) was a federal initiative established in March 2009 by the Federal Housing Finance Agency (FHFA). Its primary purpose was to assist homeowners who were “underwater” (owed more than their homes were worth) by enabling them to refinance. It aimed to provide relief to borrowers current on payments but unable to refinance traditionally due to declining home values after the 2008 financial crisis. This program was operational for nearly a decade, concluding on December 31, 2018.

Understanding HARP Eligibility

To qualify for HARP, homeowners needed to meet specific criteria. The mortgage had to be owned or guaranteed by Fannie Mae or Freddie Mac. This was important as HARP was created in coordination with these government-sponsored enterprises. The original loan must have been acquired by Fannie Mae or Freddie Mac on or before May 31, 2009, ensuring the program targeted mortgages originated before the peak of the housing crisis.

A significant eligibility factor was the loan-to-value (LTV) ratio, which generally needed to be greater than 80%. This addressed “underwater” mortgages, where homeowners had little to no equity. While originally capped, later iterations of HARP, known as HARP 2.0, removed the maximum LTV limit for fixed-rate mortgages, allowing even those with substantial negative equity to qualify.

Homeowners also needed a responsible payment history: no 30-day late payments in the six months preceding the application, and no more than one in the preceding twelve months. This supported financially responsible borrowers trapped by market conditions. The program allowed for refinancing of primary residences, one-unit second homes, and one-to-four-unit investment properties.

Key Features and Relief Provided by HARP

HARP offered distinct advantages designed to provide substantial relief to eligible homeowners. A primary feature was allowing refinancing even with very high loan-to-value (LTV) ratios, often exceeding 80%. This deviated significantly from traditional refinancing rules requiring home equity. The program removed LTV limits for fixed-rate mortgages, benefiting deeply “underwater” borrowers.

HARP enabled homeowners to secure lower interest rates, resulting in reduced monthly mortgage payments. Many borrowers also utilized the program to transition from adjustable-rate mortgages (ARMs) to more stable fixed-rate mortgages, providing predictability in their housing costs. Shortening the loan term was another option available, which could lead to substantial interest savings over the life of the loan, even if monthly payments increased slightly.

The relief provided by HARP was significant, with the average borrower saving approximately 1.66% on their interest rate and nearly $200 per month. These savings translated into billions of dollars for homeowners collectively. The program also streamlined processes, such as waiving certain appraisal requirements, to make refinancing more accessible for those who qualified.

The HARP Application Process

Applying for HARP generally involved a straightforward process, often more streamlined than traditional mortgage refinancing. Homeowners typically began by contacting their current mortgage servicer or other participating lenders to inquire about their eligibility for HARP.

A crucial step was gathering necessary financial documentation, including proof of income (pay stubs, tax returns), bank statements, and other records to verify repayment ability. Property details were also required, confirming the home’s type and status as a primary residence, second home, or investment property.

Once compiled, the homeowner submitted the application to the chosen lender. The lender reviewed it to determine if all HARP eligibility criteria were met. This review was often simplified, as HARP guidelines allowed for reduced paperwork and, in some cases, waived appraisal requirements for fixed-rate mortgages. Upon approval, the homeowner proceeded with closing on the refinanced loan, securing the new terms.

HARP’s Conclusion and Successor Programs

HARP officially concluded on December 31, 2018, after nearly a decade of operation. Its conclusion marked the end of a program that helped millions of homeowners refinance, particularly those with little to no home equity. The program was deemed a success, providing significant financial relief and stability to many households affected by the housing market downturn.

Following HARP’s expiration, Fannie Mae and Freddie Mac introduced successor programs to assist homeowners with high loan-to-value (LTV) ratios. The Fannie Mae High LTV Refinance Option (HIRO) and the Freddie Mac Enhanced Relief Refinance (FMERR) served a similar purpose. These programs aimed to provide refinancing opportunities for borrowers current on their mortgages but with limited equity, enabling them to secure lower interest rates or more stable loan terms.

While FMERR ended on September 30, 2019, HIRO continued to offer options for Fannie Mae-backed mortgages. These successor programs generally require the existing mortgage to be owned by the respective entity and often include good payment history requirements. They represent ongoing efforts to provide refinancing avenues for homeowners who might not qualify for conventional refinancing due to their home’s equity position.