The Home Affordable Refinance Program Demystified

It was in 2008 when the bursting of the housing bubble finally happened. Since then, the prices of real estate have gone down, leaving nearly one in six U.S. homeowners owing more in mortgage payments than their house is worth according to the Wall Street Journal. Moody’s also reported that that the housing slump has pushed the values of selected areas down for as large as 30%, leaving 12 million households, or about 16%, underwater.


This shocking turn of events in the economy has left many in default, resulting in foreclosures and short sales, while others still struggle to make ends meet. In response to this crisis, the United States Government launched the Home Affordable Refinance Program or HARP in the effort to assist homeowners with timely mortgage history but who are unable to seek refinancing because of lowered real estate valuation.


What is The HARP? And How Can It Help?


The HARP, also known as Home Affordable Refinance Program was made during the Obama administration. It allows borrowers to refinance into a 30 or 15 year fixed rate loan even if they owe more in mortgages than the worth of their homes. The advantage of the HARP program is that they do not require that the equity or value of the property is higher than the mortgage balance.


Traditionally, this is the requirement of finance banks or lenders. Before the HARP program was introduced, underwater home owners did not have any solution to their mortgage problems.


There are several qualifications in order to participate with the HARP. These qualifications include:


  • The home must be a primary residence
  • The borrower does not have a VA, USDA or FHA loan
  • The borrower must have a mortgage loan that is securitized or owned by Freddie Mac or Fannie Mae
  • The borrower must be current in mortgage payments, and must not have made a late payment of more than 30 days in the past year.
  • The borrower owes more than what the house is worth, and the mortgage does not exceed 125 percent of the current market value of the house.
  • The refinancing will consequently improve the long-term stability and affordability of the borrower’s mortgage
  • The borrower must have sufficient income to pay the new loan terms.


 Be reminded that if you do qualify for a refinance under the HARP Program, you will still need to submit a loan application. Plus, there are refinance fees to consider.


Features of the HARP Program


There are several features of the HARP Program that make it more agreeable than traditional refinancing. These features include:


  • Lower closing costs than a mortgage refinance from a bank
  • More lenient underwriting
  • Sometimes an appraisal is not required
  • It is possible to get low mortgage rates that are comparable to conventional loans
  • For those with loans owned by Freddie Mac, you may not be required to show proof of income.
  • There is no mortgage insurance needed.
  • For those who have a Fannie Mae loan, all closing costs may be included in the mortgage except for the credit report fee and appraisal fee if required.
  • HARP loans don’t require upfront cash.


Changes Made to the HARP Program


Just last October, the Federal Housing Finance Agency with Fannie Mae and Freddie Mac announced a series of changes to the HARP program in an effort to attain more eligible borrowers who can benefit from refinancing their home mortgage. Below are the key aspects of the recent changes made to the HARP.


  • The elimination of certain risk-based fees for borrowers who refinance into shorter-term mortgages, plus the lowering of fees for other borrowers.
  • The removal of the current 125% loan to value ceiling for their fixed-rate mortgages which are backed by Freddie Mac and Fannie Mae
  • The waiving of certain warranties and representations that lenders engage in making loans owned or guaranteed by Fannie Mae or Freddie Mac.
  • Elimination of the need of new property appraisal when there is a reliable automated valuation model estimate provided by the Enterprises.
  • Date extension of HARP deadline to December 31, 2013 for loans that were originally sold to the Enterprises on or before May 31, 2009.


By eliminating some fees, more borrowers can use HARP to refinance their short-term mortgages, while borrowers who are underwater will be able to reduce the balance that they owe much faster if they take advantage of the low interest rates that are being offered today.


Frequently Asked Questions


  • What happens to borrowers who have loans that are not owned or guaranteed by Freddie Mac or Fannie Mae?
    • Unfortunately, neither the Enterprises or FHFA have the legal authority to extend the HARP to borrowers whose mortgages were not guaranteed or owned by Fannie Mae or Freddie Mac.


  • What can borrowers do to take advantage of the HARP?
    • The first thing that borrowers can do is to find out if his mortgage is owned or guaranteed by Freddie Mac or Fannie Mae by visiting the website. If it is so, the borrower should then contact his existing lender or any other mortgage lender who is offering HARP refinancing.
  • Is there a maximum loan to value ratio for HARP?
    • There is no more maximum loan to value limit. If the borrower wants to refinance under HARP and their new loan is a fixed rate mortgage, there is no maximum LTV. However, for those whose new loan is an adjustable rate mortgage, the LTV should not be above 105%.
  • Are condominium mortgages eligible for HARP Refinancing?
    • Yes, condominiums are eligible under HARP
  • When will appraisals not be required?
    • When there is a reliable automated valuation model estimate available, a new appraisal will not be required.
  • When will these changes become available?
    • Availability will depend upon the mortgage lender. Some lenders may accommodate mortgage application using the new enhancements, while others may take a longer time.


For those who have been seeking a solution for expensive mortgage payments because of high interest rates, the HARP program may be the solution to your problems. Not only does it accept those who have underwater mortgages, but it also gives affordable rates that will help you save on your mortgage.


Reader Thoughts!

How can the HARP program help you?

What are your thoughts about the HARP program?




  • I already tried to apply for the new, revised program and was met with wonderful news–the details aren't finalized yet, specifically the removal of the 125% LTV cap. Supposedly, the politicians and bureaucrats can't get the language or something straight and it won't be ready to be sent to banks until the 2nd week of January 2012. I was hoping that this time around, it would be a little smoother process than the original plan, but so far, it just looks like more of the same.

  • YFS /

    Don't give up hope yet. The new program still might help you. I'm curious how value did your home lose compared to your purchase price?

  • It should definitely be able to help me, but it gets frustrating when they announce that it will be in place on a specific date, then to find out that it isn't ready. I guess no one in government knows that it's smart to wait until everything is ready to go before announcing things.

    I'm probably around a 48% loss on the low end. I haven't had an appraisal done, so I can't be 100% sure, but based on recent sales and "home value" websites that is a decent starting figure.

  • All you need to know about HARP | Your Finances Simplified…

    The HARP, also known as Home Affordable Refinance Program was made during the Obama administration. It allows borrowers to refinance into a 30 or 15 year fixed rate loan even if they owe more in mortgages than the worth of their homes….

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  • YFS /

    48% loss on the low end?!? Wow. That's a serious loss in home value. What is your plan if the HARP doesn't work?

  • Gosh. I realised that things were pretty bad in the rural hinterland of the US but an average slump of 30% with 16% still in negative equity some 3 years after the crash is pretty mind blowing. The basic problem with the US – and don't take this the wrong way please – is that the country is too big for the population. In certain areas on the east and west coast maybe this isn't true and I would guess that the slump hasn't hit uptown LA, NY City and DC or wherever.

    Over here there are pockets which were poor before and they have been hit quite badly. Any common type of housing has been hit but desirable Edwardian housing has been very resilient.

    But after all this, what will happen? Clearly it is advantageous on a short term basis to get a better mortgage deal and HARP sounds a move in the right direction. But are these mortgages portable? If you have to move for work or whatever, can you take the negative equity with you? Because negative equity is a millstone round people's necks sometimes for the best part of a generation.

  • YFS /

    You make some good points. But, I think the problem is that in the U.S. we treat home ownership like a right instead of a privileged. We subsidy housing, promote housing, cater to home owners. This coupled with the lax lending standards made demand for housing > supply. Hello bubble! What do you mean are these mortgages portable? If you move for work you still need to pay your mortgage. It stays with you like any other obligation.

  • If a homeowner is underwater, and is currently NOT paying PMI, I wonder if the lenders require a PMI if they quality for the HARP?

  • YFS /

    No, you won’t need to pay mortgage insurance. If your current loan doesn’t require PMI, your new loan won’t require it, either.

  • I'm just going to honor my commitment and continue to pay my mortgage on time and in full each month. I'm not behind or anything, but I was unemployed for 8 months in 2008 and spend a significant amount of savings keeping my obligations current. I figure that this would be an opportunity to at least get out from under my ridiculous interest rate of 6.875% and put the interest savings toward reducing the principal balance or toward investments.

  • YFS /

    Yea if you get a reduction in interest that would great. High principle + high interest rates was the main reason why I sat out the housing market until 2009. Good luck.

  • This is interesting. I used to run a loan modification company a few years ago, and the HAMP programs were disastrous. I wonder how many people are successful in with this program.

  • YFS /

    It seems you have a prospective in which many people want to know about. Why were the loans so disastrous?

  • YFS /

    What I find extremely funny is I received two emails today from Amerisave mortgage on refinancing my loan under the HARP. Weird…

  • I hope this works so no more homes are added to the long list of foreclosures! The less foreclosure inventory, it is more likely that home values will increase.

  • The HAMP required delinquent borrowers to go on a "3 month trial" plan to prove to the lender that they can make the reduced payment. Afterwards, most borrowers were supposed to get switched into a permanent modification of their mortgage.

    The problem was that some borrowers went 6+ months paying their mortgage, and then the lender didn't approve their modification. And afterwards, they ended up foreclosing on their homes.

  • YFS /

    Interesting point of view. Do you think HARP is good for housing in the long term? or Do you think government shouldn't tamper in the markets directly?

  • YFS /

    Wow now that isn't right. So you're telling me, people me the requirements and still were foreclosed upon?

  • Yeah, messed up right? The money that they paid went towards their delinquent balance, so pretty much they were paying for nothing. They might as well just used that money to save up for a rental property.

    However, I THINK most banks are becoming better at processing these modifications. Most of the processors there were unfamiliar with the new guidelines, since it was something new to everyone.

    But if you were able to get approved, I've seen some extraordinary interest rates as low as 2% for 40 years.

  • They're watching you! 🙂

  • I don't think HARP is primarily used to prevent foreclosures. Bank's really need to follow through with Obama's Making Home Affordable program and really put the consumer's first. Or, they need to come up with more internal programs to help the consumers. However, I agree that bank's shouldn't go trigger happy giving out modifications to everyone in need. The consumer should be able to comfortably afford the payments.

  • YFS /

    Holy crap 2%. I would refinance under the HARP for that. Fortunately, my home increased in value.

  • Sounds like a good initiative, hope it all comes through. It is terrible to hear about the housing slump over in the US, I hope the recovery comes soon.

    @Eric well done on hanging in there, I hope things turn around for you and you come out in front sooner rather than later.

  • YFS /

    Shaun is there a housing crisis in the U.K. as well? Some areas in the U.S.A. were hit extremely hard. I was at a loss for words when Eric specified his estimates for how much value he perceived was lost on the low end.

  • Sounds like a valuable option for some. We don't have these kinds of plans in Canada.

  • YFS /

    Miss T. This was a by product of the real estate crash. I noticed you said a valuable option for some. Do you think it is fair?

  • What's the general housing market like in Canada? I'm sure it's not half as bad as it is in America?

  • It really depends. I am not a big believer in exceptions. Everyone should have access to the same stuff.

  • Aloysa /

    It is a good option for those who need it. I actually had a customer who had to sell his house as a short sale because his real estate agent advised him not to pay mortgage since he could not find a good refinancing program. Can you imagine?

  • YFS /

    Ouch it sound like that real estate agent was overstepping their boundaries just to get a sale. I am willing to bet the agent profited from the short sale. Now the homeowner has to deal with ruined credit because of they were seriously delinquent on their mortgage.

  • David /

    The idea is good, but the effectiveness of this program has not. I have found that only a very small percentage of home owners have actually been able to qualify for the program. The hoops they have to jump thru are enormous and if they don't qualify it has hurt their credit.

    The government created the housing crisis, now they think that can fix it. Go Figure.

  • YFS /

    Interesting.. I thought the new program was supposed to alleviate the issues of the last version of the HARP. Also, why do you think the government created the housing crisis?

  • I am in the process of doing a Harp 2 refi. 🙂

    I am at approximately 150% LTV, after putting down 20% + closing costs + made numerous repairs out of pocket before moving in (my house was a bank-owned foreclosure). But it's not as bad as it might have been. I'm so glad I didn't buy at the peak. Home prices in my area have fallen 70% from the peak. Can you imagine buying a home and a few years later being at 300% LTV? Not pretty.

    After the refi, my new lower payment will make it possible for me to rent my house out for the payment should I need to move. That is a relief, because selling is certainly out of the question.

  • YFS /


    How is the refinance process going? Do you have any tips for people to make the refinance process go smoother?

  • I have read several places that the easiest way to do a Harp refi is with your current lender. My lender is Wells Fargo.

    I submitted an online inquiry on WF's website and a local mortgage consultant called me promptly.

    Thus far, I have met with the mortgage consultant once. I provided a copy of my homeowner's policy declaration page and answered a few questions regarding income, assets, and liabilities. She has explained that there will be a market appraisal (based on recent sales in my neighborhood), and they will pull my tax returns (I will sign a 4506T). From here on, everything will be email until I sign final docs.

    The loans are at market rates.

    The program does not officially start until Feb 6 for loans at 150% LTV or less, Feb 13 for loans of any LTV. I cannot lock my rate before then (and I am not entirely certain which group I am in). The last few days the rate for a 30 yr fixed has been 3.875. Unbelievable! I really hope it stays there while I am waiting to lock.

  • YFS /

    What are you loan terms now? How much would you save per month if you can lock in a 30 year fixed at 3.875?

  • I am 4 years into a 30 yr fixed at 5.25 now. If I can lock at 3.875, my payment will go down $190 per month. I'm a single mom with a modest income, and that amount is significant to me.

    As the refi progresses, I will let you know how it is going.

  • Well, Harp 2 loans are not at market rates, they are at a premium. I can get 4.6375. I'm at 5.25 now, so this is not an attractive deal for me. I am not moving forward.

  • YFS /

    Wow.. that really is unfortunately. So, was it any advantage to possible go through with the loan or was it a complete waste of time?

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