By now, nearly everyone has heard the term “HARP” used in advertisements on the radio, in print, on television or from telephone solicitors.
So what does the term HARP refer to? HARP is a government sponsored program which allows homeowners to refinance even if their home is worth less than what they owe on the loan. In loan talk, the homeowner’s loan-to-value (“LTV”) ratio is too high. LTV is the term used by lenders to identify the amount of equity that a homeowner has. Homeowners with lower LTVs have more equity. Conversely, homeowners with higher LTVs have less equity. The higher the LTV the more difficult a homeowner will have when attempting to refinance. HARP is designed to help homeowners with 80% or higher LTVs.
The eligibility requirements of HARP are as follows:
- The loan must be owned or guaranteed by Fannie Mae or Freddie Mac. Since Fannie Mae and Freddie Mac do not service their own loans most homeowners have no idea whether or not Fannie Mae or Freddie Mac owns their loans. However, homeowners can easily check to see if Fannie Mae or Freddie Mac owns their loans by checking on https://ww3.freddiemac.com/loanlookup/ or https://ww3.freddiemac.com/loanlookup/.
- The loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The loan cannot have been refinanced under HARP previously. There is an exception if the loan is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
- The current LTV has to be 80% or greater.
- The loan must be current and the borrower must have a good payment history within the past 12 months.
In a nutshell, HARP was created to assist homeowners that are underwater (very high LTVs) on their loans. HARP is a very good option for those that are eligible. However, there can be obstacles to obtaining HARP such as junior liens (2nds and such) that might need to be subordinated. Homeowners should seek out a lending professional that is experienced not only with HARP but also experienced with handling more complicated refinance situations.