Underwater? Take a Look at the New HARP

Nov 3, 2011 by

Home Affordable Refinance ProgramAbout 25% of U.S. homeowners are “underwater,” meaning their mortgage balance is more than their house is estimated to be worth, post-crash.

The Challenge

Mortgage interest rates are at historic lows, and refinancing would ease the challenges of many underwater homeowners. However, a mortgage lender typically will finance an amount a bit less than a home’s current appraised value. This takes the refinancing option off the table for many underwater homeowners. To refinance, an underwater homeowner would have to cough up the cash to pay off the “above water” part of his or her current mortgage–converting a paper loss into a real one.


Now the Home Affordable Refinance Program–known as HARP–has been changed to boost eligibility. An additional 1.8 million underwater homeowners are expected to be eligible. To put this in context, as of August 31, 2011, 894,000 homeowners had refinanced through HARP.

Several HARP rules have been loosened to encourage participation, but the most significant eliminates the “loan-to-value” ratio constraint. HARP loans were capped at 125 percent of a home’s value. But this cap has been removed, so now HARP can help no matter how deep underwater a homeowner may be.


Only mortgages sold to Fannie Mae or Freddie Mac on or before May 31, 2009 qualify for HARP help. You must be current on your mortgage, have had no late payments over the past six months, and no more than one late payment in the past twelve months.

Talk to a mortgage lender after November 15 (the date that guidance on operational details will be sent to mortgage lenders and servicers) to learn if you’re eligible for HARP. Most mortgage lenders will likely not begin offering the new program until early 2012.

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