“HARP” is the Home Affordable Refinance Program. It was first created as part of the government’s Making Home Affordable program in February 2009. At the time, the U.S. economy was less than 6 months removed from the collapse of Lehman Brothers, the fall of Merrill Lynch, and the movement of Fannie Mae and Freddie Mac into conservatorship.
Through the reduction and elimination of “normal” hurdles to refinancing, HARP was meant to stabilize housing and the U.S. economy.
How Would HARP 3 Help?
The HARP program specifically modifies qualifying guidelines to allow homeowners to refinance even if you owe more than the home is worth.
The HARP program has been modified and extended several times in an effort to help more underwater homeowners reduce their interest rate. However, there has always been one huge hurdle that has prevented many underwater homeowners from refinancing.
In order to qualify for HARP, your current mortgage must be owned Fannie Mae or Freddie Mac. HARP 3 proposes to allow underwater homeowners to refinance, regardless of who currently owns your mortgage.
The HARP 3 proposal also suggests that the process be streamlined so that it is similar to qualifying for a FHA Streamline, or VA Interest Rate Reduction Loan.
Qualifying for these loans only require a verification of employment and an “on-time” payment history for the past 12 months. FHA and VA Streamline loans typically will not even require income verification or appraisal.
What Could Stop HARP 3?
For as much chatter, news and debate as there has been around expanding this program, we are surprised by the absolute lack of actual action or activity on the proposed bills sitting stagnant in committees.
Even if FHFA Director Watt is considering loosening up HARP guidelines, market conditions might leave less of an impact than most underwater homeowners are hoping for.
Rising interest rates make the goal of reducing rates on underwater mortgages less and less likely. Should HARP 3 happen, it is likely that the new loan is an FHA loan, which carries upfront mortgage insurance, and a monthly mortgage insurance payment which is required for as long as you have an FHA loan.
The other challenge that HARP 3 advocates face is the steady increase of home values in Hawaii over the past year. If Director Watt believes that the real estate market can recover on it’s own, he may be less likely to push the topic of expansion to the program.
If you want to see if you can refinance your home, please contact Ron directly at 808-329-0900.