What is the Home Affordable Refinance Program?

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Your Question: What is the Home Affordable Refinance Program?

Professor Tate Answers: 

The Home Affordable Finance Program or HARP is a federal effort by the Federal Housing Finance Agency that is set-up to help homeowners who are currently paying their mortgages. In the onset of the burst of the real estate bubble in 2008, the need to rescue a lot of homeowners from losing their homes have prompted the government to come up with structural ways to assist them. The program was meant to stimulate the economy by catering to one of the most affected sectors, real estate.  

When the real estate bubble burst, the value of the homes of the owners plummeted. This gave them a very challenging time since that made them ineligible to file for bank financing assistance. The banks had a requirement, the loan-to-value ratio or LTV should be at 80% or less before they can consider them for refinancing. Now, with their homes devalued, this situation posed a great problem. 

The HARP was created by the Federal Housing Finance Agency to address this problem. The program allows homeowners with higher LTV to avail of refinancing assistance. Since its inception, the program has gone through quite a few milestones. 

In March 2009, the HARP was announced and was launched a month after. Then in July 2009, the LTV ratio cap raised from 105% to 125%. March 2010, the program announced its extension for one more year, enabling more families to avail of the assistance. By October 2011, HARP 2.0 was announced. 

HARP 2.0 aimed to help more homeowners whose mortgages worth have become greater than the value of their  homes. It allows them to refinance their homes at a lower rate. Whereas the older version did not allow refinancing to those who owed more than 125%, this program allowed them to do just that, thus effectivity removing a major obstacle for a lot of families. Some of these hurdles were:

They must have less than 20% equity in the home to avail of HARP 

They must have paid their loan on time for the past 6 months

They must have a note date no later than May 31, 2009

Their mortgage must be backed by either Fannie Mae or Freddie Mac. 

This put a lot of homeowners in deep water if they weren't already, since a lot of them had privately held mortgages.

There have been several more changes since the launch of HARP 2.0. In January 2012, Fannie Mae and Freddie Mac reduced or eliminated their add-on fees. This helped improve consumer costs.  Then in 2013, the eligibility date was changed to the date on the note instead of when the loan was acquired by Fannie Mae or Freddie Mac. This in turn allowed more people to become eligible for refinancing. By the second to third quarter of the year, the program also offered 15-year fixed rate and less documentation allowing more people to access it. HARP has been extended through December 31, 2016.

You asked, now you know!

-Professor Reel S. Tate 

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