The US government created the Affordable Home Refinancing Program (HARP) to help homeowners refinance mortgages with better rates or lower payments. It is reserved for mortgages issued by government-sponsored enterprises and aims to prevent foreclosures. HARP loans have features such as fixed interest rates and less stringent insurance requirements. The program may have an expiration date and terms could change.
In the United States, the government created methods for citizens to protect home ownership following a housing market downturn that crippled real estate values. An Affordable Home Refinancing Program (HARP) is one result of those efforts. This government program is a non-traditional way for homeowners to refinance a mortgage to include more attractive interest rates or lower monthly payments. There are specific criteria that must be met in order for homeowners to be eligible for a HARP loan.
A HARP loan is reserved for mortgages issued or guaranteed by a government sponsored enterprise (GSE), such as Fannie Mae or Freddie Mac. It is a tool that can be used by select homeowners to maintain a residence despite unfortunate financial circumstances. The loan can be extended to individuals with a mortgage loan that is worth more than the actual price of the house. This unfortunate circumstance could occur when home values are depressed.
One purpose of a HARP loan is to curb foreclosures in the housing market. A HARP loan is issued before a homeowner is dangerously far behind on their mortgage payments, at which point circumstances may be too far gone for any refinancing and foreclosure may be imminent. The government could step in and approve a HARP loan in the event a homeowner doesn’t qualify for more traditional forms of mortgage refinancing.
Features of a HARP loan might include a fixed interest rate that is lower than the previous rate assigned to the mortgage and fast processing for refinancing. The nature of a HARP loan is to increase the chances that a homeowner won’t be forced into foreclosure, and if the terms of a mortgage can’t be changed to more attractive terms, this special loan becomes irrelevant. The insurance requirements for a HARP loan are less stringent than with traditional loans where the equity held by the homeowner is similarly low. Also, in order to issue a HARP mortgage, a borrower doesn’t necessarily have to go to the same lender that issued the original home loan.
Any government-issued program, including HARP, may have an expiration date. Lawmakers could extend the life of a program like HARP if an economy or housing market continues to falter. In addition, the terms of federal loan programs could be changed during the life of this initiative.
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