Understanding HARP & Other Loan Assistance Options

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Updated: August 31, 2023

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The Home Affordable Refinance Program, or HARP, is a U.S. government program designed to enable mortgage loan refinancing for homeowners who are current on their mortgage payments but may have had difficulty refinancing because their properties are upside-down or underwater, meaning the market value of their properties are less than the balance of their loans. In other words, they owe more than the properties are worth.

HARP helps these homeowners with negative equity to refinance into more affordable and stable mortgages. With current interest rates at relative lows, homeowners can potentially lock in a lower interest rate than the one they pay under their current loans or move from an adjustable rate mortgage to a fixed rate mortgage, or both. A HARP refinance can also help homeowners avoid paying private mortgage insurance if they do not already pay the insurance under their current loans.


HARP is part of the Making Home Affordable program, also known as the Obama Refinance and A Better Bargain for U.S. Homeowners. In the industry, it is called DU Refi Plus by Fannie Mae and Relief Refinance by Freddie Mac. Introduced in early 2009, HARP underwent simplification in 2011 to increase the number of eligible loans. Known as HARP 2.0, these guideline changes permit borrowers who may have been turned down previously by HARP to become eligible.

The government says homeowners who have refinanced through HARP have benefitted from significant cost savings. The Federal Housing Financing Agency (FHFA) estimates that borrowers refinancing through HARP into a 30-year fixed-rate mortgage save on average $200 per month, with an average 1.75 percentage point interest rate reduction, resulting in $74,000 in savings over the life of the new loan. The U.S. government estimates that 9 out of 10 eligible homeowners have failed to take advantage of HARP. The FHFA shows the number of homeowners who would benefit from a HARP refinancing using this detailed, interactive map.

HARP Requirements

You can refinance through the Home Affordable Refinance Program one time, with one exception. If you refinanced under HARP through Fannie Mae from March to May 2009, you may be eligible to refinance again.

Dec. 31, 2018, is the deadline for HARP refinances, which means your refinance must bear a loan note date on or before this date. As of January 2015, nearly 3.3 million loans have been refinanced through HARP. With nearly 19 percent of borrowers still underwater as of late 2014, according to some estimates, hundreds of thousands of homeowners could still benefit from HARP.

To be eligible for a HARP refinance, you must meet five basic requirements.


Loan Cut-Off Date

Your current loan must have originated on or before May 31, 2009. If your loan note date falls after May 31, 2009, you are not eligible for a HARP loan. There are no exceptions to this rule. The federal government chose this date as the cut-off with the rationale that someone purchasing property after that date would have known the type of housing market the homeowner was buying into.


Fannie Mae or Freddie Mac Loan

Fannie Mae or Freddie Mac must own or guarantee your loan. HARP does not apply to jumbo mortgages. Fannie Mae and Freddie Mac only own or guarantee conventional, conforming loans. Learn if Fannie Mae or Freddie Mac owns your loan. Check both tools, as one lists Fannie Mae loans and the other lists Freddie Mac loans. If neither Freddie nor Fannie owns your loan, then you are not eligible for HARP.


Good Payment History

You must be current on your mortgage payments. You also must not have had any payments late by 30 days or longer in the last 6 months and you must have had no more than one late payment 30 days or longer in the 12 months before your HARP refinance.


Specific Property Type

Your loan must be for property that is your primary residence, one-unit second home or one- to four-unit investment property. There are no exceptions.


Minimum Loan-to-Value Ratio

The current loan-to-value (LTV) ratio of your home must be greater than 80 percent. Calculate your LTV ratio with the Fannie Mae LTV ratio tool.

What You Don't Need For a HARP Refinance

Misinformation about HARP requirements confuses homeowners, creating a stumbling block to homeowners who stand to benefit. Many homeowners mistakenly believe HARP is too good to be true and its qualifications are exceedingly complex so that very few borrowers can qualify.

Despite what you might have heard, the requirements for HARP eligibility are fairly simple. HARP 2.0 has further eased the requirements for eligibility and made the process easier, eliminating income verification and documentation requirements for some borrowers.

Here are some common HARP misconceptions:

  • Minimum Credit Score
    HARP sets no minimum credit score, so a low credit score won't disqualify you from HARP eligibility. Some HARP approved lenders, however, will set tighter guidelines, including a minimum credit score for homeowners who pursue a HARP refinance through them.

  • Minimum Loan Amount
    Your property cannot be automatically deemed ineligible based on a minimum loan amount or outstanding loan balance. However, the program applies only to conventional conforming loans. HARP does not apply to jumbo mortgages, which are generally for loans in the amount of $417,000 or more.

  • Primary Residence Only
    Your mortgaged property doesn't need to be your primary residence. You can also seek a HARP refinance for your second home as long as it's a one-unit residence, such as a single family residence or condominium unit. You can also refinance one- to four-unit investment property.

  • Maximum LTV Ratio
    In the first few years of the program, HARP limited your loan LTV ratio to 125 percent for fixed-rate mortgages. Fannie Mae and Freddie Mac have for the most part done away with the maximum LTV ratio limit. If you refinance into a fixed-rate mortgage, your new loan LTV ratio is not capped. But if your new loan is an adjustable rate mortgage, your LTV ratio may not run over 105 percent.

You can hold a first and second mortgage on your property and still be eligible for a refinance, provided the second mortgage holder agrees to remain in a junior lien position to the first mortgage holder. Keep in mind that even though the LTV ratio doesn't matter for HARP eligibility, some lenders limit the maximum allowable LTV ratio to 125 percent as a way to minimize their underwriting risk.

4 Steps to Get Started With HARP

You may see conflicting requirements and steps to apply for HARP. That is because the U.S. government changed the requirements and steps to apply for HARP after launching the program. Follow these steps to start the HARP process.


Check Your Eligibility

See the section HARP Requirements above to learn if you, your loan, and property are eligible. You must meet all five conditions to qualify for HARP.


Gather Your Financial Information

Your HARP lender will typically ask for your most recent income tax return, property tax bills and pay stubs. Have on hand your current monthly mortgage statement, which provides information about your current loan principal, interest, homeowners insurance and property tax amounts. Also collect paperwork detailing account balances and payments on all of your debts, including any credit cards, student loans and car loans. Your lender will request information about existing second mortgage or home equity lines of credit. A good summary of your recent income is your federal tax return, and some lenders ask to see your most recent 1040 return.


Talk to Your Loan Servicer

With your pay stubs, bank statements, and tax return at the ready, call your mortgage servicer (the company you make your home loan payments to) and tell them you wish to discuss Home Affordable Refinance. If you qualify, your servicer is required to offer a HARP refinance option. However, your servicer


Talk to Other Servicers

Your servicer may be required to offer HARP loans, but no servicer is required to offer the best deals on HARP loans. Shop around, and switch lenders if you are offered a lower rate or lower costs. Use a refinance comparison calculator to help you find the best deal. See the section Where to Apply for HARP below to learn details on the application process.

The federal government has made an effort to accelerate the HARP approval and closing process. HARP 2.0 significantly reduced documentation requirements. For instance, the program has largely eliminated income verification. You can satisfy the income verification requirement by providing proof that you have at least 12 months of mortgage payments in reserve. Each mortgage payment consists of the monthly amount due for principal, interest, real estate tax payments, property insurance and, if applicable, homeowners association or community dues.

HARP has reduced other documentation requirements. It no longer requires verification of large deposits that appear on a borrower's bank or other asset statements. It has eliminated the appraisal requirement as part of the approval process. In most cases, if an automated valuation model (AVM) exists for your property, a separate, new appraisal will be unnecessary.

Where to Apply for HARP

You can complete a Home Affordable Refinance Program loan with any participating mortgage lender, or your existing mortgage servicer. The government requires that all mortgage servicers for loans owned by Fannie Mae or Freddie Mac participate in HARP for those loans. It's smart to compare offers from different HARP lenders. Use either the Fannie Mae or Freddie Mac HARP lender finder tool to identify and locate approved HARP lender.

In deciding where to apply, consider these factors:

  • Familiarity
    The path of least resistance goes through your existing mortgage servicer, which is already familiar with your mortgage and financial situation. In some cases, however, your loan servicer may not staff the loan officers to bring you through the HARP refinance process.

  • Underwriting Requirements
    As a way to reduce their risk, some HARP lenders impose tighter underwriting and approval requirements than those specified under HARP. For example, even if HARP does not require income verification, a HARP lender may nevertheless require it. It may be worthwhile to inquire about prospective HARP lenders' underwriting requirements before choosing your HARP lender.

  • Loan Interest Rates and Terms
    Not all HARP lenders are created equal. Interest rates and loan terms will undoubtedly vary among lenders, so consider shopping around for the rate and term that best fit your goals. In this manner, treat your HARP refinance as you would a traditional refinance.

  • Refinance Fees and Closing Costs
    Fees and costs will also vary among HARP lenders, so obtain estimates of refinance fees and closing costs from lenders you are considering. You will quite likely shoulder the costs of application, processing and title search, so shopping around will net you the best deal. If your finances can handle it, you may want to consider refinancing into a loan shorter than a 30-year term because HARP reduces certain risk-based fees for homeowners refinancing into shorter terms.

Downsides to HARP

As you investigate the Home Affordable Refinance Program's requirements, you may come upon roadblocks that indicate the program may not be a great fit for you.


5 HARP Alternatives

What if you are not eligible for HARP? What are your options if you are not eligible for HARP? Or, perhaps your current loan is eligible for HARP. Should you refinance through the program? What are your alternatives if you choose not to? Consider these five alternatives to HARP:


Keep Your Loan

You could simply continue on cruise control and stick with the rate and terms of your current loan. Perhaps you've decided that this route is a sustainable, long-term strategy, you don't want the hassle of another refinance process and you can continue to submit monthly payments without heading into financial trouble.


Default and Allow Foreclosure

What if it's likely you won't be able to stay ahead of your mortgage payments in the long-term? If you fall behind on mortgage payments, foreclosure or personal bankruptcy could loom. Defaulting on your mortgage gives your lender the right to foreclose on your property and seize it to satisfy the outstanding balance. How it goes about foreclosing on your property depends on the specific laws of the state in which your property is located. If you believe you will face foreclosure, you could consider asking your lender to accept a deed in lieu of foreclosure. A deed in lieu of foreclosure is a transfer of your property title to your lender in exchange for the cancellation of the remaining debt you owe. You would lose the property but avoid foreclosure.


Consider a Short Sale

You could also consider approaching your current lender with a short sale. In a short sale, you would sell the property to a third party with your lender's approval. The proceeds of the sale go to the lender to satisfy the loan. The amount your lender receives is less than the amount you own on the loan. Your lender may cut its losses and agree to accept this lower amount. It may believe that it would be better off receiving some of the outstanding loan amount through a short sale rather than having to proceed with a foreclosure and recoup an undetermined amount from a foreclosure sale. In the event of a short sale, the unpaid loan balance would have negative effects on your credit score and could remain on your record for up to 7 years.


Pursue a Loan Modification

Another alternative is to work out a loan modification with your lender. The loan modification could reduce the remaining principal loan amount or the interest rate on the loan. If working directly with your current lender is not an option, you could pursue a modification through the federal government's Home Affordable Modification Program, provided you meets its eligibility requirements.


File For Bankruptcy

If you want to avoid foreclosure but your lender declines a short sale or loan modification, you could file for Chapter 7 or Chapter 13 bankruptcy. Chapter 13 bankruptcy is more suitable for homeowners who have regular income and whose property is a primary residence that they want to continue to occupy. It allows you to set up a repayment plan for a three- to five-year period to give you time to make up for missed payments, provided you remain up-to-date on all your repayment plan payments. The downside of a bankruptcy filing? The bankruptcy stays on your credit report for 10 years, which would make it difficult for you to get credit. It could prevent you from purchasing another home, getting life insurance and taking out an auto loan.

HARP or Foreclosure: Should I Stay or Should I Go?

Deciding what action to pursue — apply for a refinance through the Home Affordable Refinance Program or not — depends on four factors, including the LTV, projections for the local real estate market, personal goals and the laws of the state in which your property is located.

The higher it is, the less equity you have in your property, which means a high percentage of your monthly loan payment is devoted to paying interest rather than paying down the principal, the actual loan amount. A HARP refinance can help you increase the proportion or amount devoted toward paying down the principal, a much more palatable scenario than your current situation.

If local property values are trending up and experts project continued appreciation, take a wait-and-see attitude and hope the market alone will pull you out of negative equity. Or, you could proceed with a HARP refinance sooner rather than later to reap the benefits of a lower monthly payment and capture the increased equity to your property as a result of the market's movements.

Before making your final decision, obtain an understanding of the state laws affecting your property. Find out what your state's anti-deficiency laws are and how they would apply in the event you face foreclosure. A deficiency is the amount of the loan that remains unpaid even after a foreclosure sale. Anti-deficiency laws prevent a lender from filing a lawsuit against the homeowner in an attempt to seize other assets to satisfy the remaining balance of a mortgage loan.

Typically, anti-deficiency laws apply to primary residences, not investment property. In states with anti-deficiency laws, lenders who foreclose on a property cannot pursue the homeowner for the unsatisfied amount of the loan.

If the property is your primary residence and you are determined to continue residing there, refinancing your current loan may offer the best scenario for securing this goal.

Ultimately, knowing all your available options, including a HARP refinance, will best arm you to make the right decision for your situation.

About Joanne Liu

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Joanne S. Liu, a former real estate attorney, writes about history, travel, real estate, financial and legal topics for numerous publications — such as Credit Union Business Magazine, The History Channel and MotorHome Magazine — and has authored several books, including "Barbed Wire: The Fence That Changed the West." Learn more about her work at JoanneLiu.com.