What is a HARP Loan? Harp Mortgage Reviews
There are some common questions floating around regarding HARP loans. What is the HARP Program? What is a HARP Loan? Do I qualify for HARP?
Before delving into how to qualify for HARP, it is beneficial to define exactly what the HARP program is, what it does, and for whom it is intended.
HARP stands for Home Affordable Refinance Program. It was enacted by the U.S. federal government and established by the Federal Housing Finance Agency in March of 2009. Under HARP, homeowners who meet the HARP loan requirements (explained below) can qualify to refinance their home mortgages.
What Led to the HARP Program?
During the mid-2000s, a collection of moving parts led to the over-inflation of home prices (and their underlying valuation) throughout the United States. As such, the value of many real estate assets dropped sharply between 2007 and 2009. This caused millions of homeowners to be “underwater” in their debt to asset ratio.
After the notorious 2008 recession, many homeowners experienced what is called “negative equity.” To clarify, negative equity occurs when the value of an asset, such as a home, is less than the balance of the current loan on the asset.
HARP was initiated to help those homeowners who are unable to refinance because of the aforementioned negative equity. However, there are certain requirements to qualify for the HARP program.
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What are the HARP Loan Requirements? How Do I Qualify for HARP?
HARP has made several adjustments in the years since it began. At first, HARP loan requirements only permitted those with a loan-to-value ratio (LTV) between 80% and 125%. However, this and other initial restrictions have been revised and are described below.
Fannie Mae and Freddie Mac are government-subsidized entities originally set up to help increase U.S. home ownership.
Fannie Mae was enacted in 1938 during FDR’s “New Deal.” Freddie Mac was instituted in the 1970s as a competitor to Fannie Mae’s dominance of the secondary mortgage market.
Both institutions have some involvement in many home loans. This is particularly true for those home loans with increased risk of default due to shaky homeowner credit ratings or “low to no” money down scenarios.
Also, Freddie Mac and Fannie Mae packaged and sold mortgage-backed securities. Mortgage-backed security is the term used for bundling a group of loans together which are then sold on the securities market.
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This is a far more complex process than can be described here.
If the mortgage-backed security is underwritten, or originated from, Freddie Mac and Fannie Mae, then there exists governmental assurance of less risk should the loans default.
Of course, when there was a default tipping point, such as during 2008, the U.S. government had to step in and take conservatorship over both institutions.
Suffice to say, there is a good chance many home mortgages are backed by, or in some way linked to, Freddie Mac and Fannie Mae, thus meeting this portion of the HARP loan requirements.
Keep in mind, there is a difference between a mortgage servicer and a mortgage lender.
Many commonly known banks such as Bank of America and Wells Fargo merely perform collections on the loans. They are classified as mortgage servicers.
Meanwhile, the home loan itself may actually be originated by another institution.
- The loan-to-value ratio is more than 80%.
As previously described, the loan-to-value ratio is the comparison between the amount of loan in relation to the asset valuation.
Different banks will apply this requirement based on their own specifications for refinancing. Therefore, don’t be discouraged if one bank refuses to underwrite HARP loan refinancing. If this should happen, it is highly recommended you apply for refinancing with other banks.
Again, each bank has different criteria in terms of risk, and though encouraged by Freddie Mac and Fannie Mae to participate in HARP, not all lenders are required to do so.
To help determine the home mortgage loan-to-value ratio, there are several online calculators that assist consumers through the process. Fannie Mae’s Loan-to-Value Calculator is a great place to start.
- Mortgage payments must be current.
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HARP allows for only a single late payment within the 12 months prior to the refinancing application. Furthermore, there must be no “30 day+ late payments” within six months prior to the application.
- The home is a primary residence, second home, or investment property.
This necessity is relatively self-explanatory regarding the HARP loan requirements. The HARP website adds the detail of the second home being a 1-unit property, and the investment property must be a 1- to 4-unit property.
- The loan was initiated on or before May 31, 2009.
The May 31, 2009, date is non-negotiable. However, there is a small detail. This is not the closing date of the loan. As per Rhonda Porter, who spoke with a Fannie Mae representative in 2012, “It is the date Fannie Mae securitized the loan which may be weeks after the closing date.”
Therefore, if the “securitized loan” date is after May 31, 2009, there is a distinct possibility the homeowner does not qualify for the HARP program.
Are There Any Other HARP Loan Requirements?
Other considerations not listed on the HARP website are:
- Homeowners are only eligible to qualify for HARP once per home.
- HARP refinances the current loan but doesn’t lower the principal balance.
- HARP is not meant to be used to halt foreclosures. As stated above, homeowners must be current on their loan payments.
- Only first mortgages qualify for HARP. If there is a second mortgage, HARP will only refinance the first and leave the second one untouched.
- HARP loan requirements may or may not require additional valuation appraisal. This largely depends on what is called an automated valuation model (AVM).
- The application deadline for the HARP program is December 31, 2016.
- Due to the differing terms of each loan (i.e. adjustable rate, fixed rate, and balloon mortgages), the HARP program may or may not greatly reduce mortgage payments.
- If the current, non-HARP loan carries private mortgage insurance (PMI), then the HARP refinanced loan requirements will also need the to carry the same private mortgage insurance. Otherwise, it is not required.
Are There Any HARP Program Reviews or HARP Loan Reviews?
Refinancing in the post-2008 crash has the potential to lower your monthly mortgage payment. The HARP program allows many different lending institutions to refinance mortgages through the specific HARP loan requirements detailed in the above section.
Therefore, HARP loan reviews and HARP mortgage reviews are lender dependent. This means that reviews are centered on particular lending institutions, such as Bank of America or 1st Mariner Bank, rather than on the HARP program itself.
While there is a single collection of suggested lenders at the Top Ten Reviews website, there are no specific customer reviews or ratings indicated.
Therefore, it’s difficult to determine the overall customer experience regarding these institutions without performing a distinct review search for each lender.
With this in mind, the best first action to take would be to search for a HARP lender. The Fannie Mae website has a search function where consumers can find specific HARP lenders in their state.
After gathering a list of 3 to 5 potential HARP lending partners, searching consumer sites such as Consumer Affairs, Yelp, and Credit Karma home mortgage reviews will yield important information regarding overall customer experience.
For example, Quicken Loans is listed as a HARP lending partner in Nevada. At Credit Karma home mortgage reviews, they average a 4.3 out of 5 stars. Quicken Loans is also listed as a top ten lender at the Top Ten Reviews website, thus giving credence to their status as solid potential HARP loan refinance partner.
Conversely, Network Capital has a solid 5-star rating on Credit Karma home mortgage reviews. There are 9 pages of glowing reports of their speedy and efficient customer service throughout the refinance process. Certainly, as with all businesses, a select few aren’t completely happy customers. However, out of 86 reviews, only one reported a less than stellar interaction with Network Capital.
In contrast to Quicken Loans, Network Capital is not mentioned anywhere on the Top Ten Reviews 2016 Best HARP Loan Reviews.
As such, it is important to consider each lender carefully. Despite the specifics of how to qualify for HARP, certain financial institutions are not required to refinance via the HARP program. Only those original servicers for the Freddie Mac and Fannie Mae guaranteed loans are mandated to participate.
The HARP program has lowered the home loan default rate since its inception in 2009. Furthermore, it has helped to decrease the mortgage payments of many homeowners who met the HARP loan requirements.
While HARP provides a good faith effort in assisting financially troubled homeowners, there is no assurance that obtaining a HARP loan will have a significant impact on your mortgage payment.
Just as there were many compounding issues within the 2008 mortgage crisis, there continue to be bank and market level factors impacting refinancing rates. These are issues over which HARP has no direct control.
Even with government backed loans, lenders continue to be extremely cautious in this post-2008 world. As such, it behooves the homeowner who does qualify for HARP to research lender options carefully.
Finding both the best refinancing rates and the absolute highest quality customer service can mean the difference between a miserable or glorious experience over the next 15 to 30 years.
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