The mortgage crisis might not make the nightly news anymore, but that doesn’t mean that it is completely over. In the first quarter of 2015, more than 13% of homeowners were underwater on their mortgages. Being underwater means that the mortgage holder owes more than 25% of the market value of the home. Those owners can’t sell their homes because the price they would likely receive wouldn’t satisfy the loan amount. There is good news: In just three years, the number of underwater mortgages has more than halved. But that doesn’t help those who are still struggling.

Since the mortgage crisis is no longer top-of-mind, underwater homeowners may not know about the Home Affordable Refinance Program, better known as HARP. It could be just the assistance they need.

What Is HARP?

This government program is designed to help underwater homeowners refinance their homes and lower their monthly mortgage payment by lowering their interest rate in many instances. The average homeowner will save $179 per month and pay less over the life of the loan, according to the HARP website. You can elect to refinance the loan with a lower payment or pay down the loan faster, building more equity in a shorter period of time.

More than 3.2 million homeowners have taken advantage of the program, but estimates suggest that there are more than 600,000 U.S. households still eligible to refinance through HARP. 

The program also eases qualification criteria. Most homeowners won’t need an expensive appraisal or underwriting, and there’s less paperwork for income verification. 

Do I Qualify?

Before you apply, make sure you’re qualified.

First, your loan must be owned by Freddie Mac or Fannie Mae. Keep in mind that “Fannie” and “Freddie” don’t make loans – they guarantee them. Just because your payments don’t go to Fannie or Freddie doesn’t mean you’re not eligible. The HARP website can help you find out if one of these guarantor programs is involved in your loan. 

Second, if you took out the mortgage on or before May 31, 2009, you might be eligible. This also means that if you bought your home any time after the middle of 2009, you’re not eligible for the HARP program.

Third, your current loan-to-value ratio (LTV) has to be greater than 80%. You can calculate your LTV using this tool. In most cases, a high loan-to-value ratio isn’t a good thing, but in the case of HARP, the higher the better. In the past you couldn’t refinance your home if the LTV was above 125%. Under new standards, no home is too underwater to qualify. 

Finally, you’re paid up on your mortgage. You can’t have any loan payments that are 30 or more days late and you’re allowed only one late payment in the past 12 months. If you meet all of these conditions, it’s time to apply.

How Do I Apply?

HARP doesn’t lend money. Instead, the program works with lenders to offer HARP loans. First, check with your current lender and see if it offers HARP loans. (You can also go to and search for your lender.) 

As with any high-dollar purchase, talk to more than one lender and compare the terms for each. Once you decide on a lender, it will guide you through the rest of the process.

The Bottom Line

HARP doesn’t decrease the amount of money you owe – it refinances the loan to reduce the interest rate and lower the payment. To get out from being underwater on your home faster, you can refinance with HARP but keep the same payment or pay more. The lower interest rate combined with the higher payment will rapidly increase your equity.