Playing the HARP after 2008
Not a soul in the United States isn’t at least nominally acquainted with the housing bubble of 2008, one of the ultimate sources of today’s large-scale economic woes and the smaller-scale problems facing families across the nation. The dramatic slide real estate prices have seen since then has slowed, but certainly not let up, and more and more homeowners are finding themselves “underwater”. The federal government stepped in quickly to help address the problems facing responsible mortgage holders hit hard by the decline in housing prices, however, called the HARP program, the Home Affordable Refinance Program. The HARP program has helped thousands of people out, and for anyone currently in a less-than-optimal position regarding their mortgage, it offers a bright glimmer of hope.
Why the HARP Program?
Before we get into the meat of the program details, we should probably take a brief look at why it was necessary, so you have a better understanding as to what goes into the plan on a large scale, and thus, a better understanding as to what those large-scale goals mean for you on a personal one.
Broadly speaking, the housing bubble of 2008 saw the rise of real estate prices to record-breaking highs that just weren’t sustainable. As soon as the market realized things couldn’t remain at those high prices, they (logically) dropped. Fast, hard, and uncontrollably; the slide continues even today, in fact, albeit much more slowly than in the early days of the bubble.
What this meant for the economy at large was a slow-down in general; as real estate sales slowed, demand dropped, and supply saw a surfeit of properties in more than half the states of the USA, GDP saw a sharp decline; and on the individual level, people who’d bought homes near the peak of their rise in 2008 were now paying for properties valued much lower than what they would be paying on their loans.
How the HARP Program Helps
The federal government, in an attempt to curb the damage coming out of the housing bubble, wrote up and implemented the HARP program to allow responsible homeowners who are current on their mortgage payments and suffering due to circumstance and at no fault of their own to refinance their mortgages without purchasing mortgage insurance.
While this sounds relatively minor a fix, it can be a lifesaver for homeowners stuck trying to make ends meet during an economic downturn by letting them secure lower monthly payments and regain equity on their home — and in precarious market conditions like today’s, this can easily mean the difference between solvency and bankruptcy.
What the HARP Program Does
The details of the HARP program are complex, as are details on just about every federal program, but the basic idea is pretty easy to wrap your head around: Basically, the HARP program allows holders of underwater mortgages (i.e., mortgages whose outstanding values exceed the value of the homes they’re financing) who are current on their payments to refinance that loan without having to purchase mortgage insurance.
Under the original law passed in 2009, the HARP program allowed only those with LTVs (loan to value ratios) greater than 80%, but that was later amended to allow homeowners who’d purchased mortgages with LTVs up to 105% to qualify, a number later raised to 125%, and then uncapped, so that anyone with an underwater mortgage could refinance their loans under the HARP program with virtually no penalties.
Who it Helps
What with all the modifications to the HARP program (we’ve seen HARP, HARP 2.0, and HARP 3.0 by now), it’s hard to keep track of who the HARP program is for, who’s doling out the aid, who’ll benefit most, and whether or not you’ll benefit as much under this version as you would have under a previous one.
Rest assured, however, that if it sounds like you qualified under the relatively restricted HARP program 1.0, you’re still eligible for help today — and if anything, the benefits would be better now than earlier. The only emendations to the program have been extensions, really, so don’t worry about later versions of the law having negative implications you.
There are, however, a certain set of government-implemented requirements, which you have to meet to be eligible. These include the requirement that the loan be owned or guaranteed by Fannie or Freddie (Fannie Mae or Freddie Mac; ask your bank about this, as neither entity deals with the public directly); that the homeowner benefit by securing a lower monthly payment or more stable loan (e.g., an fixed-rate mortgage instead of an ARM); that the LTV ratio be greater than 80%; that the mortgage has not been refinanced under the HARP program previously; and that the homeowner is current on their payments, and has been for at least six months.
Changes in the HARP Program
As we mentioned above, the HARP program has gone through several versions; the original HARP 1.0, the HARP 2.0, and the HARP 3.0 have all seen the pens of lawmakers, and in the case of the first two, deployment in the real world. And while most of the changes aren’t relevant in the sense that they affect your eligibility if you were able to get help under the original plan, there are some significant alterations in the later versions that bear mention.
The HARP program 2.0, for instance, upgraded the HARP program 1.0 by allowing people who’d purchased homes with a down payment of less than 20% and had purchased PMI (private mortgage insurance) to qualify for the program. Even so, lifting this restriction hasn’t always been helpful — many people have had issues refinancing with their original lender with PMI, for example, but in general, having the option has been a boon for everyone.
The HARP program 3.0 is a plan that has yet to pass, but promises that homeowners would save an additional $3000.000 on their mortgages by expanding coverage to those with loans backed by entities other than Fannie Mae or Freddie Mac.
Who to See about the HARP Program
The easiest way to get started applying for and implementing a HARP program backed refinancing of your loan is to talk to the bank that sponsored your mortgage in the first place, in conjunction with the agency that provides your private mortgage insurance, if that’s relevant to you. Oftentimes, the two organizations will work with one another directly on your behalf, but there will be certain issues that require your input for security reasons (typically minor things, such as verification of license ID and social security numbers), so it can be beneficial to have your bank and PMI provider on a three-way conference call.
You might also want to see your accountant about your funds, payments, current prospects, and what you’ll likely be dealing with after implementing the plan. Although mortgage refinancing is almost always useful for those who go through with it, it does require that you pay parts of, it not all of, the previously owned mortgage, which can be difficult to handle; and in the case that you’re in financial straits enough that handling the initial load posed by the implementation of the plan would be too much, it might pay more in the long run just to wait.
What’s Involved with the HARP Program?
The first step is to take the battery of Am I eligible questionnaires on the HARP program website, which is easy enough to do; it’s formatted such that even someone with minimal knowledge of the refinancing process can make it through with no problems at all. Just collect the information it prompts you for, click the relevant quiz, and get to it.The next step is to get in contact with your bank and PMI provider, which is easy enough; a phone call will usually suffice. The website will provide you with a list of the relevant questions, so just shoot them over to whoever’s helping you out on their side of things, and you’ll be golden.
After that, it’s a matter of talking to the relevant people at the bank, whose names you should learn pretty quickly after going through the above few steps. At that point, the game is as simple as following the right steps: It’s basically plug ‘n’ play.
Getting the HARP program to Help You
While the decision to refinance a mortgage is a big one that can be difficult to make, it’s often the only choice that would guarantee long-term financial security. Whether or not it’s right for you is dependent on the nature of your mortgage, your payment history, and current financial condition, but even with all these variables, it’s pretty easy to determine whether or not you should bite the bullet and refinance: Just talk with your accountant, loan provider, and insurance agency, and you’ll be good to go. So, if it seems right, let the HARP program help you recover from the biggest economic bubble the US has seen in decades — all it takes is a few phone calls
