The third iteration of the Home Affordable Refinance Program (HARP 3.0) is expected to pass congress in the coming year and is poised to further widen the number of homeowners who are eligible to refinance their mortgage.
What Is HARP?
The Home Affordable Refinance Program was launched in 2009 as one component of the broader stimulus efforts that made their way through congress. It was one of President Obama’s first acts intended to help struggling U.S. homeowners pay their mortgage each month.
When the floor underneath the housing market collapsed in 2008, millions of Americans were left with mortgages that they could no longer afford. Some lost jobs and others watched helplessly as the interest rates on their adjustable rate home loans began to balloon out of control. During this period, home prices began to plummet leaving many Americans in underwater mortgages.
In response to the housing crisis HARP was devised to make it easier for people to stay in their homes and pay their mortgages each month. The average amount that homeowners save when they refinance with HARP is around 20% off of what they were previously paying.
An estimated 1 million homeowners refinanced under the first three years of HARP. But not everyone was eligible for HARP when it was first released. HARP eventually gave way to HARP 2.0 which sought to broaden the number of people eligible for the program. With many of the previous restrictions relaxed, refinancing to a lower rate became a viable option for millions who had previously been excluded.
What Is Different About HARP 3.0?
Each version of HARP has been designed to make it easier for more people to refinance. For example, the first version of HARP had loan-to-value (LTV) restrictions in place. Those with LTV ratios above 125% were ineligible. That requirement has since been removed. Another restriction that fell with the second version of HARP is that you no longer had to refinance with a specific lender. It is now possible to refinance through HARP with any lender in the United States.
Because HARP 3.0 still hasn’t been approved by congress, there is no way to tell for sure what it may look like when it gets passed. However, there are a number of changes which mortgage experts anticipate will be part of any new HARP bill.
- Homeowners who took out a 30-year home mortgage with a subprime loan might finally be able to refinance.
- Refinancing a single mortgage multiple times may become possible under the new version of HARP. Serial refinancing has long been a popular feature of FHA streamline loans. And if this feature is added to HARP it could allow homeowners to refinance again after 6 payments have been made to the bank.
- The cut-off date of May 31, 2009 could be eliminated allowing homeowners who got their mortgage after this date to be able to refinance.
- Another possible change that could come with the new version of HARP is the ability to refinance high-balance loans in designated high-cost areas such as Manhattan, New York.
If you’re one of the millions of Americans struggling to keep up with a mortgage that has slipped underwater or you’re just looking to lower your monthly payments, then refinancing with HARP may be for you. Even if you’re currently unable to refinance because you don’t meet certain eligibility requirements, the federal government is working to loosen many previous restrictions which have been in place. Help is not that far off in the distance.
