The HARP 2.0 program is also known as, “Making Home Affordable, the Obama Refi.” The program was created by the Federal Housing Finance Agency in March 2009 to allow those with a loan-to-value ratio exceeding 80% to refinance without paying for mortgage insurance.
In order to be eligible for the HARP 2.0 refinance program: Your loan must be backed by Fannie Mae or Freddie Mac. Current LTV (loan to value) must be greater than 80%. Must be current with no past due payments in 12 months. Home must have been purchased on or before 5/31/2009
What Is HARP?
The Home Affordable Refinance Program (HARP) was a federal initiative that gave homeowners with negative equity the chance to refinance. It was launched back in 2009 when the country was in the midst of the subprime mortgage crisis. From then until 2018, HARP helped millions of homeowners find their financial footing.
Through HARP, some borrowers were able to lower their mortgage rates or reduce the length of their loan terms. Others traded in mortgages with variable interest rates for fixed-rate mortgages, making managing monthly payments less challenging.
HARP offered relief to people who couldn’t qualify for conventional refinance loans. After the housing bubble burst, many homeowners saw their home prices drop dramatically. As a result, many Americans found themselves with mortgage loan balances that exceeded the value of their homes. Despite the controversy surrounding the program, HARP played an integral role in the economic recovery process by strengthening the housing market.
The government made multiple changes to HARP over the years. In July 2009, it increased the maximum loan-to-value (LTV) ratio that homeowners could have from 105% to 125%. A few years later, the Fed introduced HARP 2.0 when it became clear that too many borrowers couldn’t qualify for the original program.
How Does HARP 2.0 Work?
Unlike HARP 1.0, the updated version of the program had no (LTV) ceiling for individuals with fixed-rate mortgages. So under HARP 2.0, it was possible to qualify for a refinance loan with a LTV ratio above 125%. If you had an adjustable-rate mortgage (ARM), however, you wouldn’t be eligible for the program if your LTV ratio exceeded 105%.
HARP 2.0 streamlined the refinance process by allowing borrowers to replace their existing mortgage loans without getting an appraisal or going through an underwriting process. Plus, it adjusted or waived some fees for homeowners who wanted to reduce their loan terms. Specifically, it reduced risk-based fees (known as loan level price adjustments) to 0% when loan terms lasted for less than 21 years and to 0.75% when loan-terms lasted for at least 21 years.
The last version of HARP also reduced the amount of documents needed to verify whether applicants met the program’s income requirements. A borrower could’ve qualified as long as they had enough savings to pay their mortgage for at least a year.
Thanks to HARP 2.0, homeowners no longer had to work with their original lenders. They might have qualified for a refinance even if they had lender-paid mortgage insurance. If you had private mortgage insurance (PMI), you wouldn’t have needed additional insurance coverage. Furthermore, lenders were off the hook for fraud that took place when the original loans were issued.
Got any questions about a HARP 2.0 refinance loan program in Connecticut then text or call me now at 203.913.6016