Since 2009, qualified homeowners in the United States have been able to benefit from refinancing their existing mortgages using what is known as the Home Affordable Refinance Program.
Launched as a federal program in March of that year, the focus of HARP is to provide a viable means of refinancing to homeowners who find that their mortgages are underwater or at least close to being underwater.
A mortgage is considered underwater when the current market value of the property drops below the outstanding balance owed to the lender. For example, the current market value of the home may be $300,000, but the mortgage balance is $340,000. In this scenario, the property owner could find it difficult to refinance the debt with more traditional lenders.
Part of being able to answer the question of what is HARP refinance involves understanding what the program was designed to accomplish. The goal is to provide the opportunity to refinance a mortgage and lock in terms that are more in line with the current financial circumstances of the homeowner.
This was especially important during the last recession, since many people experienced less than pleasant changes in the amount of income they generated each month.
With the aid of HARP refinancing, homeowners are up to date on their mortgage payments but are having a hard time financially keeping current can refinance the remaining balance owed and secure payments that are easier to fit into the current household budget. This approach makes it possible to alleviate the financial stress and minimizes the potential of falling behind in payments and possibly facing foreclosure.
Qualifying for HARP refinancing involves not having more than one late mortgage payment in the last 12 months. Freddie Mac or Fannie Mae must own or at least guarantee the current mortgage. The current value of the property is also important. That value is used to calculate what is know as the Loan to Value or LTV. If the resulting figure is 80% or higher, the applicant has a good chance of being approved.
Several factors will impact the HARP rates offered to an applicant. As with any type of mortgage refinancing, the overall financial situation of the applicant is taken into consideration. That includes the current amount of the monthly income that goes for other essentials like food and utilities. Any credit card debt, car loans, and other obligations are included as part of the evaluation process.
In the best case scenario, the applicant is up to date with all debts, including the current mortgage. When this is the case, the homeowner is likely to receive an offer that includes a rate that is equal to or at least very close to the current average market rate.
While the HARP program was originally slated to end in 2016, it will remain in effect through at least Septamber 2017. If the amount owed on a residential property is more than it would sell for in the current market, it makes sense to submit an application and find out how much of a difference the program would make.