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Understanding HARP Loans

For U.S. homeowners struggling with payments, and who are looking for Uncle Sam’s help in refinancing into a more affordable mortgage, good news is on the way.

In August 2017, the U.S. Federal Housing Agency announced it would extend its Home Affordable Refinance Program (HARP) through 2018. The loan refinancing program was due to expire on September 30, 2017.

By and large, HARP has enabled homeowners otherwise unable to gain a traditional mortgage to refinance their home loans, often with favorable interest rates as low as 4%. HARP loans are especially a lifeline for homeowners whose home values are less than the amount they owe on their mortgages (a condition lenders call being “underwater” on one’s home).

U.S. government data shows that 22% of all HARP loan participants are underwater on their homes, owing at least 105% of their home’s value.

Can HARP Help You?

If you’re looking for a mortgage refinancing loan lifesaver of your own, can HARP help you get the job done?

The short answer is yes, but even with the extension, you’d better act now, as a lack of huge demand will cause HARP to eventually melt away, and take good refinancing loans away in the process.

“HARP, otherwise known as the Home Affordable Refinance Program, was developed in 2009 to help borrowers whose equity was wiped out during the great recession of 2008,” explains Ryan O’Kane, co-founder and senior loan officer at Arbor Financial Group, in Santa Ana, CA.

The program specifically helps underwater homeowners by eliminating the loan to value qualifying guidelines of a typical mortgage, O’Kane says.

Yet O’Kane issues a cautionary note on HARP loans. “As home prices have continued to appreciate since 2009, the need for HARP has diminished,” he says. “Most homeowners are no longer upside down in their loans and consequently do not need the program.”

O’Kane says the HARP program is becoming less and less relevant by the day since most homeowners facing negative issues have already addressed those issues years ago. “Unless there is another real estate market crash I don’t expect the HARP program to be available much longer,” he adds. “We haven’t originated a HARP loan in two years.”

Still, if you’re facing an uphill climb with your home mortgage, and need to get out from being underwater on your home’s value, HARP is here for another year-plus. Eligibility requirements do apply. You’ll need to be current on your home mortgage payments, not have any late payments in the past six months, and you must work with a HARP-approved lender.

That’s not all. HARP.gov also offers these eligibility hurdles that need to be cleared before you can be approved for a HARP loan:

  • Your home must be either your primary residence, or a one-unit second home or a one-to-four-unit investment property.
  • Your loan must be owned by Freddie Mac or Fannie Mae. Find out if that’s the case by using HARP.gov’s Loan Lookup Tools. Find Fannie Mae here and find Freddie Mac here.
  • Your home mortgage loan was originated on or before May 31, 2009.
  • Your current loan-to-value (LTV) ratio must be greater than 80%. HARP.gov enables you to check your LTV ratio using this online calculator.

Lastly, know that the likelihood of Uncle Sam extending the HARP loan program for the long-term—even past the current phase-out date of December 31, 2018 —isn’t a strong one, as more Americans seem to be getting square on their mortgage payments.

Consequently, if you need help getting your home mortgage out from underwater and onto solid ground, don’t wait to look into a HARP loan. Because if you wait too long, HARP may not be there to help you refinance that troublesome mortgage.

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