The HARP refinance program was going to expire on September 30th. The Federal Housing Finance Agency announced recently that it would extend the Home Affordable Refinance Program or HARP 3.0 through the end of 2018. This is good news for people who are struggling with their mortgage and who owe more on their home than it is worth.
The HARP loan program was started in the heart of the mortgage meltdown in 2009. It was designed to help people who were either underwater on their mortgage or almost underwater to refinance. Under normal circumstances, it is impossible to refinance a home loan without equity in the property, and many of these home owners also suffered from bad credit, making the situation completely untenable under normal mortgage lending standards.
Since 2009, HARP refinance program has been extended several times. It was first extended to the end of 2016, even though the FHFA director noted that the program could not go on forever. It then was extended until Sept. 30, 2017, with the idea to make a bridge to a new refi program that FHFA launched in October 2017.
However, FHFA has stated that it is extending HARP 3.0 again because of several changes to its high LTV streamlined refinance program. This was created for borrowers who are up to date on their current mortgage but cannot do a refinance because their LTV ratio is higher than the maximum limits of Fannie Mae and Freddie Mac. The FHFA has stated that it decided to extend the HARP refinance program to make sure that high LTV borrowers who were eligible for HARP would still be able to refinance.
FHFA has stated that 143,000 home owners may be able to still benefit by refinancing with a HARP mortgage.
Since the program was started, more than 3.4 million people have been able to refinance their home loan into a lower cost loan. For some people, this has allowed them to save their home.
Freddie Mac announced they issued some $22 billion of credit risk transfer bonds since 2013, but this is the first time the HARP refinance has been used as collateral.
HARP 3.0 Requirements
Are you eligible for HARP? To qualify for this program, your loan has to be owned by Fannie Mae or Freddie Mac; FHA loans do not qualify. The loan must have been closed before May 31, 2009. The loan to value or LTV has to be within 80% to 200%. This means if your home is valued at $100,000, you may not owe less than $80,000 or more than $200,000 to qualify for a HARP refinance.
The home must be your primary residence, a second home, or an investment property with one to four units. Also, you need to be current on your mortgage. For the HARP 3.0 program, you may not have any 30-day late payments in the last 180 days and only one in the last year.
Most lenders and banks would not consider the HARP, a mortgage for bad credit, but it is definitely one of of the few refi-options for people with less than perfect credit and no equity. So don’t consider the HARP as a ‘bad credit home refinance‘.
How Much Money Can You Save with a HARP Refinance?
If you are eligible for HARP 3.0, how much money can you save? This will depend upon the value of your home, your interest rate, and other factors, but here is a hypothetical scenario to give you an idea.
Let’s assume you bought your home in April 2009. Mortgage rates at that time were around 5% for a 30-year fixed loan. On a $200,000 home loan, if your rate was 5.125% and you could refinance to a rate of 4.125% now, you could save $120 per month and at least $43,000 over the life of the loan. Now, $120 per month is a lot of money for most people. So, with HARP refinance rates priced so competitively, it is definitely worth looking into.
Note that you still can be rejected for a HARP modification loan if you cannot demonstrate that you have sufficient documented income to pay the mortgage, or if your other debts are too high. A bad credit score may also lead to being turned down, but it will depend upon your other financial factors. The minimum credit score will depend on the HARP lender, but 620 is a common minimum score.
Find out the monthly payment now with the current HARP refinance rates.
Can the New HARP Refinance Program Help You?
We think that it can for many people. Some borrowers did get frustrated with earlier mortgage relief programs that they could not qualify for. But HARP loan program has been retooled several times and has had some obstacles removed to ensure that more people can qualify. The newest version of HARP 3.0 is expected to help thousands of underwater home owners to lower their monthly payments and hopefully save them from foreclosure.
One of the problems with the earlier versions of HARP was that it did not allow for a refinance for a borrower who owed more than 125% of what the property was worth. That limit was a major obstacle to many thousands of borrowers who bought their home at the height of the real estate boom and whose homes plunged in value during the crash. But HARP 3.0 now has removed that limit.
HARP refinancing now also has released the lender’s liability on the original note. This is a major incentive to get more lenders to embrace the Home Affordable Refinance Plan.
Even if you have a second mortgage, you still may be able to participate in the new HARP. This can lead to delays because the second mortgage lender has to sign off on the refinance and must agree to subordinate the loan to the first lien holder. But more lenders are signing off on current HARP refinances than ever before, so we think that this program will be a huge help to many people.
References: HARP Refinance Basics. (n.d.). Retrieved from http://www.bankrate.com/finance/refinance/harp-2-refinance.aspx