Editor’s Note: The HARP program expired December 31, 2018, and a popular replacement option, the Freddie Mac Enhanced Relief Refinance (FMERR) loan expired September 30, 2019.
However, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.
The Federal Housing Finance Agency (FHFA) has extended the Home Affordable Refinance Program (HARP) through December 31, 2015. This program, utilized by over 2.8 million homeowners to date, was set to expire at the end of 2013.
This is welcome news to underwater homeowners who have not yet refinanced. The HARP loan is available to homeowners who have less than 20% equity in their homes. Most homeowners who have used the program owe more, sometimes much more, than their home is worth.
The program was introduced in April 2009 and has proven widely popular. “We are extending the program so more underwater borrowers can benefit from lower interest rates,” said FHFA Acting Director Edward J. DeMarco.
Another goal of the extension is to reduce financial risk to Fannie Mae and Freddie Mac. The FHFA announcement says the extension will “reduce losses for Fannie Mae, Freddie Mac, and taxpayers.” Fannie and Freddie are now government-owned organizations. Borrowers who stop making their payments may cause losses that will eventually land on taxpayers’ shoulders.
A nationwide campaign will soon be launched by FHFA to educate the public about HARP requirements. The goal is to motivate homeowners to “explore their options and utilize HARP before the program ends,” according to a news release on April 11, 2013.
The FHFA indicated that there were no other changes to HARP besides the extension in this announcement. This fact may be disappointing to some.
Anyone who has an option ARM, Alt-A loan, or other type of non-Fannie or –Freddie loan are left without an option to refinance into today’s low rates. Proposals have been introduced in Congress, known as HARP 3.0 or #MyRefi, but none have passed yet. One Oregon lawmaker even created a HARP 3.0-like loan for certain Oregon residents, nicknamed the Merkley Mortgage.
It’s unclear whether Congress will loosen HARP requirements, but at least HARP-eligible homeowners now have two more years to complete their refinance. Property values are rising nationwide, but not fast enough to make up for the tremendous loss of equity from 2008 to 2012.
For this reason, the HARP program should remain very popular and helpful to homeowners as long as it is available.