Why harp refinances are dwindling

August 18, 2016/Scott Sheldon

One of the financial programs aimed at homeowners wishing to refinance in the economic downturn was Making Homes Affordable Harp 2. The program to this day allows people to refinance even if they are underwater. Here’s what you should know about this program…

How the program works

If you took out your loan May 31, 2009 or before you are eligible. The program will allow you to refinance as long as your loan is owned by Fannie Mae or Freddie Mac. The program also is very lenient on bankruptcy, and previous credit challenges and was super flexible in the loan-to-value requirement. The program while still available helped millions of homeowners nationwide secure more affordable mortgage loan financing for their financial situation.

What it lacks

It does not have any options for anyone who had an FHA Loan or for anyone who took out a loan after May 31, 2009. The mortgage industry has rumored that HARP 3 would roll out, but it never did.

Most homeowners today have equity in comparison to 2011. People can refinance their homes more easily as an exuberant economy has taken shape. People are feeling optimistic about their jobs, wage growth is picking up, and hiring is strong. People buy homes when they’re feeling optimistic about their job, income and financial future. This has lead to an increase in equity allowing many to refinance under other traditional loan programs.

The equity you need to refinance without Harp 2

  • 3.5% equity for an FHA refinance
  • 15% equity for an FHA cash out refinance
  • O% equity for a VA refinance up to 100% loan to value
  • 5% equity for a conventional refinance
  • 10% equity for a conventional refinance with no private mortgage insurance

Not all, but most borrowers today have more equity in their home than they may think especially if they bought any time before January 2014.

When the property is a rental

The minimum equity you need to have on a rental property is 25% to simply reduce the payment or lower the term. Harp 2 served a purpose when it was readily available. The program while still offered by Fannie Mae and Freddie Mac doesn’t really help any homeowners as most people can refinance under other affordable programs. Simply put, this program helps people who still have loans six or more years old.

A Harp 3 alternative should it ever become an option would be any one of following:

  • allow borrowers to refinance after May 31, 2009 without a loan to value requirement
  • extend to other mortgage loan programs providing more options for homeowners with tricky financial situations

If you are looking to refinance your home, be sure to check out all the available options to you for your financial situation.

Looking to refinance? Start now with a free quote.

 

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