What is HARP? -- The Home Affordable Refinance Program

Set up by the Federal Housing Finance Agency in 2009, the Home Affordable Refinance Program (HARP) is a special program for homeowners who have negative or almost negative equity in their homes. The program helps them get their mortgages refinanced. When the prices and values of homes dropped drastically, the balances of existing mortgages became much higher than the value of the homes. Homeowners could not refinance mortgages because the ratio of the loan amount to the home value was over the 80% allotted by lenders.

Basics of HARP

The Home Affordable Refinance Program has two purposes. It provides a way for homeowners to refinance their mortgages when they have negative equity and cannot qualify for normal refinancing. It also allows the homeowners to qualify for the program without having to purchase mortgage insurance. When the program was first created, homeowners could only qualify if their existing mortgage was no more than 105% higher than the home’s value. The limit was raised to 125% before the end of 2009. In 2011, the limit was removed completely for a period of 30 years.

Qualifying for HARP

In order to qualify for HARP, there are certain criteria that must be met. Most lenders follow the government’s requirements as follows:

• Existing mortgages must be either backed or owned by Fannie Mae or Freddie Mac.

• The mortgage must be current and all payments must be completely up to date. One late payment within 12 months is allowed. A late payment greater than 30 days within the last six months is not allowed.

• Fannie Mae or Freddie Mac must have acquired the mortgage before June 1, 2009.

• The ratio of the loan to the home value must be higher than 80%.

• Homeowners cannot have any other refinanced mortgage under HARP, with the exception of refinanced Fannie Mae mortgages from March through May of 2009.

• Homeowners must clearly benefit from refinancing under the program, through either a lower interest rate or lower payments each month.

• The homeowners must prove they have the required income to pay the new mortgage payments.

Steps of HARP Refinancing

Before you contact your mortgage company to request refinancing under HARP, you should gather the documentation you will need. This documentation should include:

• Two to three of the most recent paycheck stubs for every working adult in the household

• The last two tax returns

• Copy of the most recent mortgage statement

• Proof of any additional income, such as Social Security benefits and alimony payments

• Last two months of bank statements

• Utility bill with homeowner’s name and address of home

• Credit card balances and payment amounts

• Proof of savings accounts or other monetary assets

• Request for Mortgage Assistance form

• IRS Form 4506-T

Contacting the Lender

With this documentation available, you can contact your mortgage company and talk with a representative about the process of getting your mortgage refinanced under HARP. They will give you all their specific requirements and instructions for turning in all the verification documents that are needed. Make sure your loan company participates in the program, but any company that has loans that are owned by Freddie Mac or Fannie Mae must be participants.

The Home Affordable Refinance Program is specifically designed to help homeowners who have reached negativity equity through no fault of their own. The whole basis of the program is to reduce payments or interest rates to bring the loan to value ratio down and make the mortgage affordable. It also helps reduce the term of mortgages, allowing them to be paid off much faster. With the help of the federal government, homeowners can now avoid foreclosure.