Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program, or HARP, is 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 is specifically for borrowers who would benefit from current lower interest rates.

The Home Affordable Refinance Program (HARP) refinance is only available for mortgages that are currently guaranteed by either Freddie Mac or Fannie Mae, or 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 is only available to borrowers who qualify. They need to be current on their mortgage payments and the property must be in good condition. Borrowers who had already defaulted or had vacated their properties are not eligible for the program. Any participating lender can aid a borrower in a HARP refinance. Borrowers do not need to go through their current lender.

The program is set to end December 31, 2018.

Another program that was rolled out to stem the flow of foreclosures after the market crashed is called a mortgage modification. Unlike HARP refinances, these programs were for borrowers that had already defaulted on their loan, or for whom default was imminent.

A modification can only be secured through the existing lender, and each lender has their 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 credit worthiness. 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 may count as earned income. Anyone considering a mortgage modification should consult with a licensed tax professional to determine their any potential additional liability.