HARPing on the Details

HARP, or the Home Affordable Refinance Program was initially created in 2009 to help homeowners who didn’t have enough equity in their homes refinance and take advantage of low interest rates.
In the past, when mortgage rates dropped, people would rush to refinance. After the housing market crash, however, an unprecedented number of people were underwater in the value of their homes, and therefore did not qualify for refinance.

HARP 1.0 worked like this:
IF you have a loan through FREDDIE MAC or FANNIE MAE and
IF you are CURRENT on your payments and
IF you owe between 80%-105% on your home…
THEN you qualify to refinance your mortgage under HARP without having to pay down or purchase mortgage insurance.

The window of people who met these requirements was very small, so they opened the program up to people who owed up to 125% after only a few months.

HARP 1.0 also made banks responsible for fraudulent financing by forcing them to “buy back” defaulted mortgages where unlawful underwriting was discovered.

This actually ended up hurting homeowners more than helping them, because banks started scrutinizing homeowners’ paperwork and requiring extensive documentation, thereby lengthening negotiations and disqualifying homeowners in a roundabout way.

HARP 2.0 went into effect in December 2011 with revisions focused on opening the program to more people.
– Most notable, the program was now open to anyone underwater in their home value, not just those between the brackets of 80%-125%.
– It also protected banks from having to “buy back” mortgages, potentially streamlining the refinance process by allowing homeowners to be deemed eligible by providing only a few basic documents.
– In addition, the FHFA, Freddie Mac, and Fannie Mae have agreed to waive refinance fees for those borrowers who opt for shorter term loans. All other borrowers will pay reduced fees.
– Those with mortgage insurance are now eligible– under HARP 1.0 they were not.

Harp 2.0 has been extended past it’s initial June 2012 deadline through 2013.

President Obama, in his recent State of the Union address, stated that the new revisions would provide a refinance plan with, “No more red tape. No more runaround from the banks.”

The program is projected to save the average applicant about $3,000 per year, though critics are still wary of how effective HARP can be.

Toni and Jason J will be discussing HARP with mortgage specialists Michael DiVita and Mark Latini of DiVita Home Finance on Saturday, March 10th from 3-4pm.