What is HARP? Does it apply to me?
HARP or the Home Affordable Refinance Program, began in 2009 as part of the Making Home Affordable Program in response to the housing market crisis of 2008 by the Federal Housing Finance Agency (FHFA) and the U.S. Treasury Department. HARP allows borrowers, with loans owned by Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation) and who meet certain criteria to potentially benefit in ways such as:
- lower interest rate
- lower monthly payment
- securing a fixed rate mortgage as opposed to a variable rate
- lower closing costs
- building home equity more quickly
HARP’s eligibility requirements and guidelines have changed a bit for 2015 (HARP 2.0). The application deadline for the program has been extended to December 31, 2015. Potentially, Congress may pass HARP 3.0 or #MyRefi in 2015. But it is uncertain what impact this newest version will have or if it will even pass.
Fannie Mae’s version of HARP is called the DU Refi Plus while the Freddie Mac version is called the Relief Refinance. Both programs are essentially the same for most borrowers. The loan program homeowners use depends on who currently owns their mortgage. Fannie Mae offers a Lookup service to determine if Fannie Mae owns your mortgage. Freddie Mac provides its own search tool to establish if it owns your loan.
Eligibility and Guidelines for 2015
HARP 2.0 actually rolled out in 2012 but each year there are specific eligibility requirements and guidelines with which you should be familiar. So, in order to determine if you are eligible to apply for HARP, you need to be familiar with the requirements of HARP 2.0 and see the list below. What should you know in 2015?
- Your current loan must be owned by Fannie Mae or Freddie Mac.
- The subject property must be your primary residence, a 1-unit second home or a 1 to 4-unit investment property.
- The current loan-to-value must be greater than 80% (your loan amount is 81%+ of the home’s value).
- You must have no 30-day late payments in the last 6 months.
- You may have no more than one payment that was 30+ days late in the past 12 months. (Some lenders may require no late payments at all in the last 12 months.)
- HARP does not require that you use your original lender as long as the lender you choose is set up to do Fannie Mae and/or Freddie Mac loans.
- You may not use HARP on the same property twice.
- Until October, 2013, your mortgage had to be sold on or before May 31, 2009 to Fannie Mae or Freddie Mac. Now, it simply has to have closed on or before that date. If you have been denied for this reason previously, you may want to try again!!
- HARP allows borrowers to refinance a first mortgage with an existing second mortgage and do not set a combined LTV maximum. NOTE: HARP does NOT allow you to pay off the second mortgage if the refinanced first mortgage balance is increased. Therefore, the second mortgage owner must agree to take a subordinate position to the refinanced first mortgage under HARP. This can be time consuming!!
- HARP permits you to wrap closing costs into your new loan without limitation. Fannie Mae allows you to wrap closing costs equaling up to 4% of loan balance, while Freddie Mac will allow up to 4% or $5000, whichever is less.
- HARP loans allow you to receive cash back, but both Fannie Mae and Freddie Mac limit this to $250. There is an exception if the borrower has pre-paid for any fees.
- Under HARP, a borrower can enter into a 15, 20, or 30 year fixed rate HARP loan. Alternately, there are 5, 7, and 10 year adjustable rate mortgages (ARM) available. NOTE: if your mortgage is fixed rate, you cannot refinance it as an ARM.
- HARP does not require you to carry private mortgage insurance (PMI) but if you carry on your loan now, you’ll have to maintain it on the HARP.
- The maximum loan amount for a HARP can be up to $417,000 in 2015 for a single family (1-unit) home. The loan limits increase with the number of properties:
- 1-unit: $417,000
- 2-unit: $533,850
- 3-unit: $645,300
- 4-unit: $801,950
Taking The First Steps Toward A HARP Loan
Once you have determined that your property and your mortgage meet the minimum eligibility requirements for a HARP, you are ready to take the next step. You will need to gather all of your financial information, including bank statements, mortgage statements, tax returns, pay stubs, etc. Then you will need to contact your current mortgage company to verify that they are an approved HARP lender. Your current lender is the easiest place to start since they have you in their system and have access to all of your information. However, remember that you can always choose from a list of the approved Fannie Mae lenders and a list of the approved Freddie Mac lenders to refinance. You will need to tell your new potential lender that you are interested in a HARP loan and refinancing and be prepared to provide them with all financial documentation, including any paperwork pertaining to a second mortgage, if you have one.
If the first lender you speak with about a HARP loan denies you, ask why. You are entitled to know the reason. You are also entitled to go to a different lender or to speak with a HARP specialist. Remember that being prepared could be the difference between a “yes” and a “no.” So make certain you have all of the documents and information the lender has requested and that the HARP application requires. Take your time, be thorough, and ask questions. If you have questions you feel aren’t being answered fully, use all resources available to you. Go online and reach out to those who can help you through the HARP website.