The HARP Program

HARP was an initiative by the Obama Administration that began in 2009 and upadates since, to help homeowners with underwater mortgages to refinance into lower rates – and a lower payment.

The program was set up in the wake of the U.S. housing crisis to help homeowners lower the monthly payment on their mortgage. The program focuses on underwater homeowners, and is aimed at helping those who qualify to refinance into lower interest rates - benefitting from a lower monthly mortgage payment and helping the homeowners to get above water sooner.

HARP was created by the Federal Housing Finance Agency along with Fannie Mae and Freddie Mac in March 2009. Unlike the Home Affordable Modification Program “HAMP”, which aims to assist homeowners who are in danger of foreclosure, this program targets homeowners who are current on their monthly mortgage payments but are unable to refinance due to dropping home prices resulting from the U.S. housing market correction.

The Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program to homeowners who are current on their mortgage payments from the present loan-to-value ratio ceiling of 105 to 125 percent. With these expanded refinance opportunities, qualified borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will be allowed to refinance those loans according to the terms of the Home Affordable Refinance Program established earlier this year. “I am pleased to join Secretaries Donovan and Geithner in announcing this expansion of the Obama Administration’s Making Home Affordable program,” said FHFA Director James Lockhart. “The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. The Enterprises are also incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get ‘above water’ on their mortgages more quickly. This program could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart said.

The program provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage and therefore pay down the principal more quickly and reduce lifetime interest payments. Borrowers who refinance may see lower monthly payments and a more sustainable mortgage which will reduce the risk of default. This expansion of HARP will assist the Enterprises in managing the credit risk associated with these higher loan-to-value mortgages.