What Is a HARP Loan?

What Is a HARP Loan? article image.

The Home Affordability Refinance Program, better known as HARP, enabled qualified U.S. homeowners with little or no equity in their homes to refinance their mortgages. HARP was introduced in 2009 to address widespread mortgage difficulties during the Great Recession and ended in 2018, but newer federal mortgage-refinancing programs offer some of its benefits.

What Was the HARP Loan Program?

In the wake of the mortgage crisis of the late-2000s, millions of homeowners found themselves living in houses worth a lot less than the mortgage they used to purchase them. Because these homeowners had very little equity and a very high loan-to-value ratio (LTV), they were being excluded from refinancing to a more affordable loan. Aiming to remedy this issue, the Federal Housing Finance Agency (FHFA) created the HARP loan program so U.S. homeowners could refinance their troubled mortgages even if their mortgages had negative equity—that is, if they owed more on their mortgage than their home's appraised value.

Refinancing under HARP provided borrowers one or more of the following benefits:

  • A lower interest rate on the loan
  • A lower monthly payment
  • Conversion to a fixed-rate mortgage from an adjustable-rate loan
  • A shorter loan repayment term (for example, 15 years instead of 30 years)

Nearly 3.5 million homeowners refinanced through HARP, according to FHFA's March 2019 Refinance Report.

HARP Loan Eligibility

HARP loans were available to homeowners whose mortgage debt exceeded the appraised market value of the home—as long as their mortgage was owned by Fannie Mae or Freddie Mac, the government-sponsored enterprises that purchase the majority of American single-family loans.

Additionally, eligibility for HARP loans required the following:

  • The loan had to have closed on or before May 31, 2009.
  • The LTV (the percentage of the property's appraised value represented by the balance on the mortgage) had to be greater than 80%. (A home with zero equity that's securing a mortgage amount equal to its appraised value has an LTV of 100%; homes with LTVs greater than 100% are said to have negative equity.)
  • Loan payments had to be fully up to date when the HARP loan application was submitted.
  • Borrowers must have been current with their payments, with no 30-day delinquencies in the previous six months and no more than one 30-day delinquency in the previous 12 months.

HARP Replacement Programs

After HARP ended, Fannie Mae and Freddie Mac both introduced programs designed to help borrowers with high LTV ratios secure better loan terms. The Fannie Mae high-LTV refinance option (HIRO) and the Freddie Mac Enhanced Relief Refinance Mortgage share many of the same eligibility requirements, but each has specific rules of its own.

In any case, which one applies to you will depend on which agency owns your mortgage loan. Both agencies provide online look-up tools you can use to check. Verify with the Fannie Mae tool here and with the Freddie Mac tool here.

Fannie Mae High-Loan-to-Value Refinance Option (HIRO)

Fannie Mae's high-LTV refinancing option is designed to help borrowers whose Fannie Mae-owned loans have LTV ratios that exceed the maximum allowed under their standard limited cash-out refinance loan program (which allows refinancing of a single-family home that's your primary residence if your LTV ratio is as high as to 95% on a variable-rate loan or 97% on a fixed-rate loan).

Eligibility for refinancing under the Fannie Mae HIRO program requires the following:

  • Fannie Mae must own your loan.
  • The mortgage you are refinancing must have been issued on or after October 1, 2017.
  • At least 15 months must have passed since your mortgage was issued, or since you last refinanced the loan.
  • You must be current with your payments, with no 30-day delinquencies in the most recent six months and no more than one 30-day delinquency in the past 12 months.
  • The mortgage you are refinancing must not have been previously delivered as a Fannie Mae DU Refi Plus or Refi Plus mortgage.

If you qualify for Fannie Mae HIRO refinancing, your new loan must benefit you by providing at least one following:

  • Lower monthly payments
  • Lower interest rate
  • Shorter repayment term
  • Migration to a more stable loan product, such as from an adjustable-rate mortgage to a fixed-rate loan.

If the loan you are refinancing under the HIRO program includes private mortgage insurance (PMI), you can migrate the insurance to your new loan without incurring any additional fees.

Freddie Mac Enhanced Relief Refinance Mortgage

The Freddie Mac Enhanced Relief Refinance Mortgage program is designed to supplement its existing no cash-out refinance mortgage option, which enables refinancing of Freddie Mac-held loans with LTV ratios up to 95%. To qualify for the Enhanced Relief Refinance Mortgage, you must meet the following requirements:

  • Freddie Mac must own your loan.
  • The application for the mortgage you are refinancing must have been received on or after November 1, 2018.
  • At least 15 months must have passed since your mortgage was issued.
  • Your LTV ratio must be 105% or less if you have a variable-rate mortgage; if you have a fixed-rate loan, there is no maximum LTV limit.
  • You must be current with your payments, with no 30-day delinquencies in the past six months and no more than one 30-day delinquency in the past 12 months.
  • The mortgage you are refinancing cannot have been previously refinanced through a HARP loan.

How Can I Get Additional Help With My Mortgage?

If your mortgage is not owned by Fannie Mae or Freddie Mac, or if you don't qualify for their respective mortgage refinancing options, other resources are available to help you manage difficulties covering your mortgage payments.

  • Veterans, service members and qualifying survivors with current VA Loans may qualify for Interest Rate Reduction Refinance (IRRR) loans, which can lower monthly payments and reduce mortgage rates.
  • MakingHomeAffordable.gov, a web resource provided jointly by the U.S. Treasury Department and the U.S. Department of Housing and Urban Development, provides access to housing counselors and community organizations that can help with mortgage-payment difficulties.
  • USA.gov, the federal government's informational website, provides education and links on a variety of home-loan-related topics, including guidance on how to seek mortgage forbearance from your lender if you are having trouble making payments due to the COVID-19 pandemic.

Before its expiration, the HARP loan program helped millions of American families secure better mortgage terms. Today, new programs exist to fill the void HARP left behind.