The HARP program has been available for nearly seven years and has helped over 3 million underwater homeowners refinance.
This mortgage type has been a key part of the housing recovery. It has enabled families to drop their monthly mortgage payments when traditional refinance methods don’t work.
HARP rates below 4% have helped some refinancing households save even more.
But HARP’s days are quickly ticking away.
The current expiration date for HARP 2.0 is set for December 31, 2016. There is less than one year remaining for homeowners to qualify.
HARP Loan Still Popular with Homeowners
In the fourth quarter of 2015 alone, over 20,000 homeowners used HARP to drop their mortgage rate.
Nearly 25% of HARP refinance applicants owed at least 105% of their home’s value. This is a loan-to-value level that would keep them from refinancing if not for HARP.
In states hardest hit by the housing downturn, HARP remains a prominent portion of all refinances. In Florida and Georgia, HARP refinances represented 12% of all refinances completed in these states, according to the Federal Housing Finance Agency (FHFA) which oversees the HARP program.
Low mortgage rates are also propping up HARP refinance activity.
The average 30-year mortgage rate was expected to climb to the mid- to upper-fours. Instead, they dropped to the mid-3s, according to Freddie Mac’s
Many homeowners who calculate the numbers discover that a refinance is now cost-effective even if it was not just a few months ago.
HARP Misconceptions Delay Homeowner Action
While over 3 million homeowners have reduced their housing costs with HARP, it is estimated by FHFA that more than 300,000 homeowners who could benefit from the program.
There’s no clear answer as to why these homeowners have not yet refinanced but experts have made some sound guesses.
Homeowners have damaged credit. Millions of homeowners lost income in the economic downturn, leading to unpaid bills and damaged credit. Many still don’t qualify for HARP but are rebuilding their credit.
Homeowners misunderstand HARP. Some simply haven’t learned much about the program yet. They believe they won’t qualify even though they meet the requirements.
Homeowners believe the savings aren’t enough. Those with rates in the 4.5% to 6% range could save hundreds of dollars per month since HARP rates are under 4%. Still, many believe they won’t save very much.
Homeowners fear the process will be difficult. The HARP application and approval process is streamlined and efficient. The truth is most homeowners are surprised that closing a HARP loan is short and painless.
It is difficult to determine exactly how many of the 9 million homeowners are eligible to take advantage of HARP. What is clear is that there is potentially millions more homeowners who could reduce their monthly housing costs.
The only question that remains is, can they all get through process by the end of 2016?
Will HARP 2.0 Receive an Extension?
The original HARP loan was set to expire on December 31, 2013. That was extended by two years in April of 2013. Then in 2015, the program was extended an additional year. Will we see another extension in 2016?
It’s possible. Continued demand for the program could spur the Federal Housing Finance Agency (FHFA) to keep the program open. Low rates mean more homeowners will take advantage of the program in 2015.
HARP program updates are also possible, often referred to as HARP 3.0. Many have called for upgrades such as allowing non-Fannie Mae and -Freddie loans, and removing the requirement that the original loan be opened before June 1, 2009.
Program revamps could cause a new wave of HARP applicants and would most likely lead to an extended timeframe.
Alternate programs could ease the pain if HARP is not extended. The new conventional 97 refinance allows homeowners to drop their rate with only 3% equity in the home. Refinance applicants could apply for a standard conventional refinance with only 5% equity. With this option, their current loan does not need to be Fannie Mae- or Freddie Mac-owned.
But no program currently on the market beats the cost and qualifying ease of HARP. To beat the rush for HARP that will happen at the end of 2016, anyone with even a small chance of qualifying for HARP should apply immediately.
Even if the program is extended, rates could rise in 2016, taking the value out of a refinance.
Golden Moment for HARP
HARP rates are low and lenders are eager to gain business from HARP applicants. There have been few times that have better to receive a HARP loan than now.
Apply for a HARP refinance here and lock in recent low rates.