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What Is A HARP Loan?

What Is a HARP Loan

When the HARP Loan Program was initially introduced, it was instrumental in helping thousands of people get out of underwater mortgages. But there were many restrictions that simply made it difficult for homeowners to qualify, including a major issue involving the debt to value ratio. However, recent changes to HARP have been put in place by the Obama Administration in conjunction with Fannie Mae and Freddie Mac. These new guidelines have made it much easier for homeowners to qualify for a HARP loan and get the help they need.

With a total of more than 4 million loans currently held by Fannie Mae and Freddie Mac that fit the basic requirements for HARP qualification, most of the hurdles standing in the way of many Americans have been removed. It's now easier than ever before to qualify for the program, save money, and get the kind of help that you need.


HARP 2.0 Loan Requirements

HARP Loans


  • Am I Eligible For A HARP Loan?

    The HARP Loan Program has been carefully designed for homeowners who are responsible borrowers. Those who have managed to continue making their mortgage payments but have been denied when trying to refinance their mortgage may find that HARP can help. The goal is to get those who have found themselves with a mortgage that is for an amount greater than the value of their home will likely want to consider applying for a HARP loan.

    All mortgages closed before June 1, 2009 may be eligible for a HARP refinance. There are a few key eligibility factors to consider, and a closer look at them will help you see if you're eligible for HARP.

    Does Either Freddie Mac or Fannie Mae Hold Your Loan?

    These two lenders are the only two qualified to offer HARP loans. If they don't hold your loan, you won't qualify. To find out if your loan is through one of the two, visit their home page and follow the loan locator links.

    When Did Fannie Mae or Freddie Mac Acquire Your Loan?

    You'll need to make sure that your loan was sold to them prior to May 31, 2009. Loans acquired after that date will be ineligible for HARP loans, so be sure you know when they took over your loan.

    Are You Current?

    You'll need to be current on your mortgage, too. This means that you can't be more than 30 days late on your current mortgage payment. Additionally, HARP guidelines state that you cannot have a late mortgage payment within the last 6 months, and only one late payment is allowed within the prior 12 months. This is because HARP is designed for those who are responsible, not those who frequently make late payments or default on their loans. Remember that HARP applications can take between 3 to 5 weeks on average to close, and during that time you'll need to continue making your payments. Failing to do so could actually lead you to disqualify yourself from receiving the loan.

    These are the three key eligibility requirements for a HARP loan. Recent changes have eliminated things like occupancy or property types, which means that even those who own multiple homes, investment properties, or rental properties will be able to apply for and qualify for a HARP loan.

    If you're currently enduring the stress of an underwater mortgage, HARP loans could be exactly what you need to get out of them and into a more beneficial loan. Take a few minutes to make sure you meet these basic requirements. If you do, you owe it to yourself to speak to a lending professional.

  • Is There Little Or No Equity In Your Home?

    The HARP 2.0 guidelines have been changed to allow borrowers with high Loan-to-Value (LTV) ratios refinance their mortgages into lower rates.

    Additionally, the mortgage insurance barriers have been removed, which means you can transfer MI between new lenders without it causing your loan to get denied.

    So, this program is designed to help borrowers who owe more than 80% LTV on their mortgage.

    For example, if your balance is $81,000 and your home is worth $100,000, then your LTV would be 81%. This also means that if your balance is $150,000 on a property worth $100,000 (150% LTV), you would still be eligible for HARP.

    Have You Refinanced With HARP Before?

    The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

    If you are struggling to make your mortgage payments, or have lost your source of income, this is probably not the program for you. Instead, you may want to research other options for underwater homeowners, such as a loan modification, short sale or unemployment forbearance.

  • Major Changes To The HARP Loan Program

    While it was initially instrumental in helping many overcome the stress of an underwater or otherwise bad mortgage, the HARP program failed to live up to expectations in its early stages. This was largely because of some major barriers that still stood in the way of those applying for a refinance loan through HARP. These hurdles greatly reduced the odds of receiving the loan. However, now the majority of these barriers have been eliminated and more than 1.5 million people have taken advantage of HARP.

    There were five major roadblocks to qualifying a HARP loan that have been eliminated or modified drastically. The following list highlights these recent major changes.

    No More Loan To Value Limits

    When it was initially created, HARP had strict LTV barriers in place that meant those with negative equity of more than 25% couldn't qualify. Those who owed more on their loans than their home was valued at couldn't take advantage of the HARP program, and this was the major hurdle that thwarted so many attempts to receive a HARP loan. With the new changes, these barriers have been eliminated completely. This has put HARP loans well within reach for many who couldn't get it before.

    Lower Fees And Rate Costs

    The new changes have also put a cap on the amount of fees a bank can charge. There are also new caps on the rate increases allowed, known as Loan Limit Price Adjustments or LLPA. These caps help in a couple of ways. By lowering rates and fees the amount of money saved is significant. Additionally, it's easier to get a more stable loan that won't shift and change so often or so drastically. This helps reduce the chance of foreclosure, helping homeowners as well as the housing market as a whole.

    No More Appraisal Requirements

    Thanks to new automated property valuation systems that have been put in place by both Freddie Mac and Fannie Mae, in most cases there are no longer appraisals. Appraisals were required in the early days of HARP, but today it is much easier to secure a HARP loan without going through the hassle-filled appraisal process.

    Subordination Agreement Issues

    Subordination is an issue that only really affects second mortgage holders, but it is still something that does exist and can pose some problems in terms of red tape. The new changes state that second lien holders are allowed to qualify for HARP loans as long as they comply with any subordination requests a lender may have. This simplifies the process and helps ensure that everyone can get a HARP loan.

    Mortgage Insurance Issues

    One of the big issues that once stood in the way was that of private mortgage insurance. Now, however, mortgage companies will actually work with you to make it easier to qualify for a loan even if private mortgage insurance is in place.

    With these new changes to HARP, it's become much easier for those who need help out of a bad mortgage to receive it. There are still some other hurdles you'll have to clear on your way to getting your loan, but with the roadblocks above now a thing of the past, your path to a better loan is easier than ever before.

  • Are HARP Loans Safe?

    For many Americans, a HARP loan - also called the Home Affordable Refinance Program - is one of the best options out there for refinancing a mortgage and getting their head back above water. This is a program that pays particular attention to the problem of negative equity, which often makes it impossible to refinance through traditional loans. Borrowers have few options when they want to refinance to get out of a bad mortgage, but that negative equity can hold them down. Taking advantage of today's low interest rates is still possible, however, and that's where the HARP program comes into place.

    Those who have no equity in their homes and who hold a mortgage issued or sold to Fannie Mae or Freddie Mac before May 31, 2009 could be eligible for a HARP loan. It could move them from variable rate loans into more stable fixed rate ones, lower monthly payments, and lower the number of years left on the loan. One of the big questions that many homeowners have is whether or not a HARP loan is safe. It seems almost too good to be true, and many people have their doubts about the program. But a quick review of the program shows just how safe and effective it really is.

    For starters, the loan to value ratio of your loan must be greater than 80%. Following the housing market crash in the late 2000s, many homeowners found that they owed more money on their home than the home was actually valued at. The HARP program is designed for these homeowners specifically, and was created by the Obama administration as a way to give the help that was needed to those struggling with underwater mortgages.

    One of the big safety factors in a HARP loan is in the stability of the loan itself. One of the biggest issues facing homeowners after the market collapse was that of variable rate mortgages or balloon payments. Monthly payments would suddenly skyrocket, equity would drop, and homeowners would be left with a mortgage that felt more like a chain around their neck than anything else. The HARP program will move homeowners to fixed rate mortgages instead and give them the stability they need.

    HARP loans also shorten mortgage lengths. 30 year mortgages have often been easier to qualify for, but they do little to help lower principle sums for the first decade. By moving to a shorter 15 year mortgage through HARP, it can help homeowners build equity in their home again and put them in a much better situation.

    There are other safeguards and stipulations in place that help make HARP loans a safer option, too. Things like cash-out limitations and requirements that essentially state that a new HARP loan must be 'better' than an existing one all help make a strong case for HARP loans. In short, these are loans that are much safer than most loans being made today, and even safer than those issued in the days before the housing market crash. They're worth a look if you're struggling with your loan and need a safe way to improve your situation.

  • Background Of HARP Loans

    The Emergency Economic Stabilization Act granted certain authorities to the Treasury department in an effort to help improve the economy, stabilize the housing market, and help millions of Americans get out of the kind of bad loans that helped lead to the problem in the first place. The Obama administration used this act to launch the Making Home Affordable Program, or MHA, to help responsible homeowners dodge foreclosure and keep their homes.

    One of the keys to this process was quickly recognized as the Home Affordable Refinance Program, or HARP for short. HARP was created by the Federal Housing Finance Agency and is a federally backed program. Its initial design was simple - help underwater homeowners or those who are almost underwater refinance their mortgages by offering a better, easier to qualify for option than traditional refinance mortgages.

    By making it easier for responsible homeowners who are in danger of foreclosure or dealing with negative equity in their home to get a new loan, find a fixed rate, and take advantage of the lowest interest rates in history, HARP was a perfect shot in the arm for a struggling American housing market.

    Initial Challenges Of the HARP Program

    It's almost hard to recall it now, but in the mid-2000s, things were looking pretty good on the housing market. But in late 2006 that changed, and suddenly home values plummeted and thousands of homeowners found themselves holding a mortgage that was for much more than their home was now valued at. Home values dropped incredibly, and they're still down. It's not uncommon for homes that were bought for 300,000 dollars in 2004 or 2005 to now be worth half that. But while home values fell, the mortgage amounts stayed the same. This is known as negative equity, and is represented with a figure known as LTV - Loan to Value ratio.

    That LTV was the main problem that the initial HARP program faced. The first version of HARP set a LTV limit that meant only borrowers with an LTV of between 80% and 125% were eligible for a refinance loan through HARP. While this helped many, there were still millions of Americans who couldn't qualify for the program due to an LTV greater than 125%.

    To give you an idea of just how serious this limitation was, consider that over 1.1 million loans have been refinanced through HARP, but just over 100,000 of them held an LTV under 125%.

    Because of this, a hearing before the House Committee On Financial Services focused on this issue. The hearing looked at the declining home values and the steadily increasing number of homeowners who were defaulting on their loans. It was quickly agreed upon that changes were needed, and in October of 2011 HARP 2.0 was introduced. This new version of HARP was a tremendous success, especially when compared to the first version of the program. The 125% limit was lifted and other roadblocks were eliminated as well.

    The HARP program is just one aspect of the MHA program, but it's one that has now helped over 1 million people get a better loan. This is especially true now that the second, revised version of HARP is in place and currently lenders are receiving so many applications that it has overwhelmed them at times. This helps show just how important and effective the program can be and how much it could help homeowners.

    Today, homeowners who are current on their mortgage payments and have a solid history of on-time payments will find that the HARP program could offer an excellent way to escape from a bad loan and get their feet on solid ground again.