Following the downturn of the housing industry in 2007-2008,
millions of homeowners found they owed more on their home loan than the home
itself was worth. So, is that a big deal? If you’re trying to sell the home
it’s a very big deal. When borrowers begin to fall behind on their mortgage
payments at some point many feel the only way out is to sell the property but
if the local real estate market is in the middle of a slump they won’t be able
to sell the home for enough cash to pay off the mortgage. They’re upside down.
The Federal Reserve made multiple attempts to rescue the
market by lowering rates. Lower rates would mean borrowers could refinance into
a mortgage with lower payments and avoid foreclosure. But the catch-22 in all
that was there needed to be equity in the property to be eligible for a
refinance. Upside down borrowers were stuck. They couldn’t refinance and they
couldn’t sell. Enter HARP, the Home Affordable Refinance Program introduced in 2009.
The initial HARP allowed homeowners to refinance their conventional mortgage
even if the new loan represented 125% of the home’s current market value. But
that still kept millions on the sidelines.
HARP 2.0 was introduced in 2012 and eliminated the 125%
requirement and eliminated any loan to value issues. It didn’t matter what the
property was worth, borrowers could still refinance to a lower rate. HARP 2.0
There are additional guidelines but these are the main ones.
HARP 2.0 was a success and still is but there are still some changes that could
be made to help millions more take advantage of lower rates. There is talk of
HARP 3.0 to address these changes.
If HARP 3.0 is in fact implemented, we can expect most of
the HARP 2.0 requirements to remain yet eliminates the requirement of when the
existing loan could be funded, before June 1, 2009. If HARP 3.0 does appear and
the June 1 deadline removed, it can help millions take advantage of lower rates
and make their homes more affordable.