Unlocking the Benefits of the Home Affordable Refinance Program (HARP)
The Home Affordable Refinance Program (HARP) was an initiative set up by the Federal Housing Finance Agency in March 2009. It was designed to aid homeowners who were current on their mortgage payments but struggling to refinance due to declining home values, specifically following the U.S. housing market correction period from 2006 to 2011. This program was created to help stabilize the housing market by facilitating mortgage refinancing for homeowners who were being squeezed by underwater mortgages.
How HARP Helps
Unlike the Home Affordable Modification Program (HAMP), which focuses on assisting homeowners at risk of foreclosure, HARP targets those who continue to manage their monthly mortgage payments responsibly. HARP’s unique focus is on providing support to these responsible homeowners, enabling them to leverage current lower interest rates even when their homes have decreased in value below the balance of their mortgage.
Real-Life Example
Imagine a couple, John and Jane Nelson. They have maintained their mortgage payments punctually, even at an 8% interest rate. However, their home’s value has decreased to $100,000, while they still owe $125,000 on the mortgage. Under normal refinancing circumstances, a lender might allow them to borrow only 80% of the house’s current value, or $80,000. The Nelsons would need to supplement with a $45,000 cash payment to meet the loan balance, an amount they do not have. With HARP, however, they can refinance the full $125,000 owed on their mortgage at the contemporary lower interest rate without needing to provide the additional $45,000. This can significantly reduce their financial strain and monthly payments.
The Process
- Re-evaluation of Existing Loan: Your existing loan’s eligibility and status is assessed without impacting your current housing or mortgage situation.
- Interest Rate Adjustment: Qualifying for potentially lowered interest rates without additional cash outflow to cover property devaluation gaps.
- Simplified Refinancing: Streamline your mortgage terms under the revised financial landscape to better manage your finances.
Frequently Asked Questions about HARP
Who is eligible for HARP?
To be eligible, homeowners must owe more on their mortgage than their property is worth or have very little equity and be current on their mortgage payments.
Are there property value limits under HARP?
No, there are no property value limits under HARP, which means homeowners with the most substantial negative equity are still eligible.
What is needed to apply for HARP?
Basic documentation for the mortgage refinance application includes proof of income, credit history, and insurance verification.
Can HARP help if I have missed mortgage payments?
No, HARP is designed specifically for borrowers who are current on their mortgage payments, although help may be available through other mechanisms.
By facilitating responsibly managed mortgage refinances, HARP provides welcome relief to those stuck with home values that have dwindled, paving the way towards financial stability regardless of unavoidable market shifts.
Related Terms: Home Affordable Modification Program, underwater mortgage, mortgage refinance, housing market correction, interest rates.
