In 2009, the U.S. government introduced the Home Affordable Refinance Program (HARP) to assist homeowners in refinancing their mortgages–even if they owe more than the home's current value. The goal of HARP is to help responsible borrowers to to do the following:
- Reduce monthly principal and interest payments.*
- Reduce the interest rate.
- Reduce the loan term.
- Move from a risky loan such as an interest-only mortgage or a short-term ARM to a more stable product such as a fixed-rate mortgage.
The program was modified once in 2011 to allow more borrowers to benefit. The most significant change was that the government removed the limit on the amount borrowers could be underwater.
HARP isn't the only refinance program available to borrowers. But, it's the only one that allows homeowners with little or no equity to take advantage of refinancing's benefits.
Today, only loans owned by Fannie Mae or Freddie Mac are eligible for the HARP program. So, step one is usually finding out if your loan is owned by either of the two agencies.
If your loan is owned by one of the two agencies, you're on your way!
Next, you have to find a lender who participates in the HARP program–not all lenders do. Many of the big banks have had issues processing HARP loans. Some borrowers have found obstacles to getting HARP approval from some lenders.
In future posts, we'll look at the benefits of HARP refinancing.
* By refinancing your existing loan, your total finance charges may be higher over the life of the loan.