The Home Affordable Refinance Program (HARP): How it can Help Homeowners

Individuals or households who need to look at a refinance program or other option in order to stay in their home might want to know about the Home Affordable Refinance Program or HARP and how it can assist homeowners who are in trouble with their mortgages. Knowing more about these kinds of programs will help the average homeowner to take advantage of their rights in a tough economic situation when loan modification or refinancing may be needed to help them meet their monthly mortgage payments.

What is the Home Affordable Refinance Program?

The Home Affordable Refinance Program is part of a greater program called Making Home Affordable. The entire program, set up by the U.S. federal government, uses billions of dollars to assist homeowners who are encountering challenges with their existing mortgage loan agreements. The main way that the HARP provision works is in offering more diverse mortgage loan refinancing alternatives to people across the country.

HARP and the Greater Environmental Climate

Finance professionals are pointing out some of the main benefits that the Home Affordable Refinance Program is now offering to homeowners. One of the most popular uses of HARP involves a specific set of situations that affect many households who may not otherwise be available to cash in on generally offered refinancing programs in the private market.

In years when interest rates are extremely low, refinancing makes a lot of sense for many homeowners. The problem is that many of these property owners may not be eligible for refinancing programs due to something called a loan to value or LTV ratio. This ratio has to do with the amount of equity that is in a home or other property.

When a property owner owes more on a mortgage than the property is currently worth, they don’t really “own” anything at all, in some senses. Professionals refer to this as being “underwater” on a mortgage, and it’s a serious problem. Being underwater on any asset is extremely frustrating, as the mortgage payments and other money going out seems to be meaningless, since the underlying asset has devalued.

What HARP does for people in this situation is to make refinancing possible with a higher LTV, up to 125% of the property value. In this way, homeowners who fell victim to temporary housing price losses can still get their refinancing, achieving a lower monthly payment and racking up less interest over each successive year.

Requirements for the Home Affordable Refinance Program

A few basic requirements apply to most HARP refinancing offers. First, the property must have been originally financed in loans related to the government agencies Fannie Mae and Freddie Mac. Second, the property must be the primary home of the owner for at least one year. Good credit and other requirements may also apply.

Government has recently set a timeline for the HARP program that seems set to expire in June of 2011. For those who want to take advantage of this government assisted refinancing program, it may be necessary to start talking to mortgage professionals and other parties to get started applying for a refinancing deal.