The US government created the Home Affordable Refinancing Program (HARP) to help homeowners refinance their mortgages with more attractive interest rates or lower monthly payments. HARP loans are reserved for mortgages issued or backed by government-sponsored enterprises and aim to prevent foreclosures. The program may have an expiration date and terms may change.
In the United States, the government has created ways for citizens to protect home ownership following a housing crisis that crippled home values. A Home Affordable 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 for homeowners to qualify for a HARP loan.
A HARP loan is reserved for mortgages issued or backed by a government-sponsored enterprise (GSE), such as Fannie Mae or Freddie Mac. It is a tool that select homeowners can use to retain a residence despite unfortunate financial circumstances. The loan could be extended to people who have a mortgage loan that is worth more than the actual price of the house. This unfortunate circumstance can occur when home values are depressed.
One of the purposes of a HARP loan is to stop foreclosures in the real estate market. A HARP loan is issued before a homeowner becomes dangerously behind on mortgage payments, by which time circumstances may have gone too far for any refinancing and foreclosure may be imminent. The government could step in and approve a HARP loan if a homeowner doesn’t qualify for more traditional forms of mortgage refinancing.
Features of a HARP loan may include a fixed interest rate that is below the previous rate assigned to the mortgage, as well as fast processing for refinancing. The nature of a HARP loan is to increase the chances that a homeowner will not be forced into foreclosure, and if the terms of a mortgage cannot be revised to more attractive terms, this specialized loan becomes irrelevant. The insurance requirements for a HARP loan are less stringent compared to traditional loans where owner’s equity is just as low. Also, for a HARP mortgage to be issued, a borrower does not necessarily have to go to the same lender that issued the original mortgage.
Any government-issued program, including HARP, may have an expiration date. Lawmakers could extend the life of a program like HARP should an economy or housing market continue to falter. In addition, the terms of federal loan programs may change throughout the life of the initiative.
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