What Is the Home Affordable Refinance Program (HARP)?

The Home Affordable Refinance Program (HARP) was a program offered by the Federal Housing Finance Agency to homeowners who own homes that are worth less than the outstanding balance on the loan.

The program has since ended, but it was intended to provide relief after the financial crisis of 2008. HARP was created to help underwater and near-underwater homeowners refinance their mortgages due to falling home prices. While HARP ended in December 2018, there are still options for borrowers who are underwater on their mortgages. A homeowner who is underwater on their mortgage owes more on their home than it is worth.

Key Takeaways

  • The Home Affordable Refinance Program (HARP) was a program offered by the Federal Housing Finance Agency to homeowners who own homes that are worth less than the outstanding balance on the loan.
  • The program has since ended, but it was intended to provide relief after the financial crisis of 2008.
  • While HARP ended in December 2018, there are still options for borrowers who are underwater on their mortgages.

Understanding the Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program (HARP) refinance was only available for mortgages that were guaranteed by either Freddie Mac or Fannie Mae—the program was created in coordination with these entities. In order to be eligible for HARP, homeowners must have been in possession of mortgages that were sold to either of those entities prior to May 31, 2009.

Due to the impact of the 2008 financial crisis, and its effect on real estate values throughout the United States, many homeowners found themselves upside-down or underwater on their home loans. Upside-down or underwater are used to describe instances when a borrower owes more on a loan than the current value of the collateral it is secured against.

In the case of a mortgage, the collateral is the property. The federal government launched HARP in 2009 to attempt to slow the rate of foreclosures and help borrowers that had been taken advantage of by sub-prime lending practices.

The program was only available to borrowers who qualify. Borrowers were required to be current on their mortgage payments and the property had to be in good condition. Borrowers who had already defaulted or had vacated their properties were not eligible for the program. Any participating lender was eligible to aid a borrower in a HARP refinance. Borrowers did not have to go through their current lender.

The program ended on December 31, 2018.

Home Affordable Refinance Program (HARP) vs. Home Affordable Modification Program

Another program that was rolled out to stem the flow of foreclosures after the market crashed was called a mortgage modification. The Home Affordable Modification Program expired before HARP, in 2016. Unlike HARP refinances, these programs were for borrowers that had already defaulted on their loan, or for whom default was imminent.

A modification could only be secured through the existing lender, and each lender had its own requirements for qualification. Although the process to modify a mortgage changes the terms of a mortgage note, it is not the same as a refinance.

Sometimes modifications can report on the borrower’s credit report as having the terms of the mortgage altered. In some cases, modifications can impact future creditworthiness. Some borrowers may also be faced with an additional tax liability, as the terms of their modification may include writing off a portion of the debt that is owed, which the Internal Revenue Service (IRS) may count as earned income.