The Affordable Home Financing Program ( HARP ) is the United States federal program, set up by the Federal Housing Finance Agency in March 2009, to help underwater and near-underwater homeowners finance back their mortgage. Unlike the Affordable Home Modification Program (HAMP), which helps homeowners who are in danger of foreclosure, the program benefits homeowners whose mortgage payments are currently, but can not refinance for dropping house prices after a correction in the US housing market.
Video Home Affordable Refinance Program
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Millions of borrowers find themselves in dire straits after the US housing bubble burst in 2008. Because inventories are soaring nationally, house prices are falling. Many new homeowners see the value of their homes dropping below their mortgage balance, or nearly so. Later, these same homeowners were prevented from taking advantage of lower interest rates through refinancing, as banks traditionally require an 80% or less loan-to-value (LTV) ratio to qualify for refinancing without a private mortgage insurance (PMI ).
Take for example a house purchased for $ 160,000 but is now worth $ 100,000 due to a market downturn. Next, assume the homeowner owes $ 120,000 on the mortgage. In this scenario, the loan to value ratio will be 120%, and if the homeowner chooses to refinance, he also has to pay personal mortgage insurance. If the homeowner has not paid for the PMI, additional fees may cancel the many benefits of refinancing, so homeowners can be effectively banned from refinancing.
Maps Home Affordable Refinance Program
Program
The Affordable Home Financing Program (HARP) was created by the Federal Housing Finance Agency in March 2009 to enable those with a lending to value ratio exceeding 80% to refinance without also paying for mortgage insurance. Initially, only those with 105% LTV can escape. Later in the same year, the program expanded to include them with up to 125% LTV. This means that if someone owes $ 125,000 to a property that is currently worth $ 100,000, he will still be able to refinance and lock in a lower interest rate.
In December 2011, the rule was changed again, creating what is called "HARP 2.0"; there will be no restrictions on negative equity for a mortgage of up to 30 years - even those who have more than 125% of their home value can make refinancing without PMI. Also, the program is expanded to receive homeowners with PMI in their loans. Finally, the new mortgage lender is guaranteed not to be responsible for the fraud committed on the original loan. This greatly extends the willingness of the lenders to participate in the program.
Qualification criteria
Certain criteria must be met to qualify for HARP. While there may be additional criteria imposed by the mortgage service provider, government requirements are as follows:
- Mortgages must be owned or guaranteed by Freddie Mac or Fannie Mae. Many homeowners do not realize that their mortgage is linked to one of these organizations, because Freddie Mac or Fannie Mae is not directly in touch with the public.
- Mortgages must be obtained by Freddie Mac or Fannie Mae on or before 31 May 2009.
- The homeowner may not have previous state budget refinancing of the mortgage, unless it is a Fannie Mae loan refinanced under HARP during March-May 2009.
- Homeowners must have a mortgage payment flow, with no late 30-day payments in the last six months and no more than one late payment in the last twelve months.
- The ratio of the loan to the current value (LTV) of the property must be greater than 80%.
- Homeowners should benefit from loans with lower monthly payments or transfers to more stable products (such as switching from an adjustable interest rate mortgage (ARM) to a fixed rate mortgage).
HARP 2.0 and PMI
Many people who buy their home with an advance of less than 20% of the purchase price are required to have personal mortgage insurance (PMI). This is a common practice with the loan of Freddie Mac or Fannie Mae. Having a PMI attached to the loan makes the loan easier to sell in the Wall Street secondary market as a "full loan". PMI protects the risks brought by high-value loan ratios by offering insurance against foreclosures for anyone with "full loan".
Although HARP 2.0 allows homeowners with PMI to apply through Affordable Housing Refund Programs, many homeowners are having difficulty refinancing with their original lenders. HARP requires a new loan to provide the same level of mortgage insurance coverage as the original loan. This can be difficult and time consuming, especially in the case of personal mortgage insurance paid by the lender (LPMI). As a result, many lenders are reluctant to refinance PMI mortgages.
Fortunately, HARP 2.0 allows homeowners to go to lenders for refinancing, so mortgage owners are not hindered if the original bank does not want to pursue HARP refinancing.
Residential type
Refinancing HARP 2.0 is allowed on all occupancy types: primary residence (owner-occupied), second house, or investment property (lease). However, refinancing of investment properties by Fannie Mae and Freddie Mac HARP 2.0 has a higher mortgage rate than the property occupied by the owners.
Assignment of the reviewer
Another feature of HARP is that applicants can cancel home assessments if a reliable automated assessment model is available in the area. This can save the borrower time and money, but is subject to the discretion of the mortgage lender.
HARP 3.0
As part of the State of the Union Address 2012, President Barack Obama referred to a plan to provide "every responsible homeowner the opportunity to save about $ 3,000 a year on their mortgage". In the mortgage industry, this plan is referred to as HARP 3.0. The plan has not passed. HARP 3.0 is expected to extend HARP's eligibility requirements to homeowners with non-Fannie Mae and non-Freddie Mac mortgages, including homeowners with a jumbo mortgage and an Alt-A mortgage, those whose original mortgage is declared income, assets stated, or both.
Deadline
Although the HARP program was originally scheduled to expire on December 31, 2016, the Federal Housing Agency announced in August 2016 that it will be extended even though September 2017. The program is extended again on August 17, 2017 through December 2018.
References
See also
- Modified loans in the United States
- Correction of United States housing market
- Affordable Home Modification Program (HAMP)
External links
- Making Houses Affordable.gov
- Fannie Mae's loan tool, Fannie Mae's website.
- Freddie Mac loan search tool, Freddie Mac's website.
http://www.fhfa.gov/Media/PublicAffairs/Pages/Prepared-Remarks-FHFA-Director-at-Greenlining-Institute-22nd-Annual-Economic-Summit.aspx
Source of the article : Wikipedia
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