Definition
The Home Affordable Refinance Program (HARP) was designed by the Federal Housing Finance Agency (FHFA) to help homeowners, whose mortgages exceed the value of their homes, refinance to more affordable interest rates. It specifically targets those in negative equity situations where the home’s market value is less than the mortgage amount. HARP was initiated in 2009 to assist homeowners who, due to the 2008 financial crisis, found themselves with reduced equity in their homes and were therefore unable to refinance through traditional means.
Examples
-
Example 1: A homeowner with a $250,000 mortgage finds his home’s value has dropped to $180,000. With HARP, he can refinance his mortgage and potentially reduce his monthly payments despite the lower home value.
-
Example 2: An underwater homeowner paying 6.5% interest on a mortgage worth $220,000 before the housing market crash refinances through HARP to secure an interest rate of 4%, significantly lowering his monthly mortgage payments.
Frequently Asked Questions (FAQs)
What criteria must a homeowner meet to qualify for HARP?
To qualify for HARP, homeowners must meet the following criteria:
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been originated on or before May 31, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80%.
Is there a limit to how much can be refinanced through HARP?
No, there is no maximum LTV ratio for HARP loans, which means even homes that are deeply underwater can qualify for refinancing under this program.
Does HARP refinancing require a new appraisal?
Not necessarily. Many HARP loans do not require a new appraisal, depending on the lender and the automated valuation process used.
Can second homes or investment properties be refinanced under HARP?
Yes. HARP refinancing is available for primary residences, second homes, and investment properties as long as other program requirements are met.
Is there a deadline for applying to HARP?
The original HARP program ended on December 31, 2018, having been replaced by new programs aimed at assisting homeowners under similar conditions.
- Negative Equity: Occurs when the value of an asset falls below the outstanding balance on the loan used to purchase that asset.
- Loan-to-Value Ratio (LTV): A financial term used by lenders to express the ratio of a loan to the value of an asset purchased, represented as a percentage.
- Underwater Mortgage: A situation where the outstanding balance on a mortgage is higher than the current market value of the property.
Online Resources
References
- “Home Affordable Refinance Program (HARP).” Federal Housing Finance Agency. FHFA.gov
- “HARP Refinance Program.” Making Home Affordable. MakingHomeAffordable.gov
- “Mortgage Assistance Options.” Freddie Mac. FreddieMac.com
Suggested Books for Further Studies
- “Refinancing Your Mortgage for Dummies” by Eric Tyson and Robert S. Griswold
- “The Loan Modification Guide” by Anna Cuevas
- “The Homeowner’s Guide to Foreclosure” by James I. Wiedemer
Real Estate Basics: HARP Fundamentals Quiz
### What was the main goal of HARP when it was introduced in 2009?
- [x] To help homeowners who are underwater on their mortgages refinance to more favorable loan terms.
- [ ] To assist in purchasing new homes.
- [ ] To provide grants to first-time homebuyers.
- [ ] To offer financial counseling to struggling borrowers.
> **Explanation:** HARP was primarily introduced to help homeowners who were underwater on their mortgages by allowing them to refinance to more affordable and favorable loan terms.
### What type of mortgage holders were eligible for HARP?
- [ ] Only those with mortgages from private lenders.
- [x] Homeowners with mortgages owned or guaranteed by Freddie Mac or Fannie Mae.
- [ ] Those who obtained their mortgage after May 31, 2009.
- [ ] First-time homebuyers only.
> **Explanation:** Only homeowners with mortgages owned or guaranteed by Freddie Mac or Fannie Mae were eligible for HARP refinancing.
### Why was there no maximum LTV ratio set for HARP loans?
- [ ] To increase the program's complexity.
- [x] To help even those homes that are deeply underwater qualify for refinancing.
- [ ] To apply stricter loan terms.
- [ ] To satisfy borrower demand.
> **Explanation:** HARP set no maximum LTV ratio to ensure that homeowners with deeply underwater properties could still qualify for refinancing.
### Do HARP refinanced loans always require a new appraisal?
- [ ] Yes, a new appraisal is mandatory.
- [x] No, many loans do not require a new appraisal depending on lenders and valuation processes.
- [ ] Only for homes valued over $200,000.
- [ ] Only if requested by homeowners.
> **Explanation:** HARP-refinanced loans often do not require new appraisals, particularly if an automated valuation model is used by the lender.
### Can primary residences, second homes, and investment properties all be refinanced under HARP?
- [x] Yes, as long as other program requirements are met.
- [ ] Only primary residences are eligible.
- [ ] Only second homes are eligible.
- [ ] Investment properties are excluded.
> **Explanation:** HARP refinancing is available for primary residences, second homes, and investment properties as long as they meet other program conditions.
### When did HARP originally end?
- [ ] December 31, 2016
- [x] December 31, 2018
- [ ] December 31, 2015
- [ ] December 31, 2020
> **Explanation:** The original HARP program ended on December 31, 2018.
### What does LTV ratio stand for?
- [ ] Loan-to-Valuation ratio
- [ ] Loan-to-Volume ratio
- [x] Loan-to-Value ratio
- [ ] Long-Term Valuation ratio
> **Explanation:** LTV ratio stands for Loan-to-Value ratio and is used by lenders to express the ratio of a loan to the value of the asset purchased.
### What term is used for mortgages where the outstanding balance is higher than the current market value of the property?
- [ ] Positive Equity Mortgages
- [ ] Balloon Mortgages
- [x] Underwater Mortgages
- [ ] Amortized Mortgages
> **Explanation:** The term for mortgages where the outstanding balance is higher than the property's current market value is "underwater mortgages."
### What does the HARP acronym stand for?
- [ ] Home Aggregate Repair Program
- [ ] House Acquisition Refinancing Plan
- [x] Home Affordable Refinance Program
- [ ] Housing Affordable Rates Payment
> **Explanation:** HARP stands for Home Affordable Refinance Program.
### Under HARP, which government agency oversees the program?
- [ ] Federal Bureau of Investigation (FBI)
- [ ] Federal Emergency Management Agency (FEMA)
- [x] Federal Housing Finance Agency (FHFA)
- [ ] Internal Revenue Service (IRS)
> **Explanation:** The Federal Housing Finance Agency (FHFA) oversees the HARP program.
