Mortgage rates are reversing lower, creating opportunity for underwater homeowners nationwide. The Home Affordable Refinance Program (HARP) remains in demand, and refinancing homeowners are saving big.
At today’s mortgage rates, the vast majority of HARP homeowners will save more than 2 percent via a refinance.
HARP : Mortgages For Underwater Homeowners
The Home Affordable Refinance Program (HARP) was first launched in 2009 as a way to stimulate the U.S. economy, and to provide mortgage payment relief to responsible U.S. homeowners.
Via HARP, the U.S. government gave homeowners access to low mortgage rates for which they’d otherwise not qualify because of “lost home equity”.
At the time, homes had been losing value as mortgage rates had been doing the same. Homeowners wanting to refinance, though, were typically stymied by their home’s new equity position, or, rather, the lack thereof. Without home equity, to refinance was impossible.
And then came HARP.
Program parameters were simple. So long as your mortgage was backed by Fannie Mae or Freddie Mac; and so long as your loan was securitized prior to June 2009, you were program-eligible.
Via HARP, mortgage lenders were instructed to ignore a home’s value; and were told to avoid changing a loan’s existing private mortgage insurance (PMI) arrangement. If a mortgage to refinance was originally structured without PMI, the HARP-refinanced loan would be without PMI, too — regardless of loan-to-value.
Similarly, if a loan was initially established with borrower-paid PMI or lender-paid mortgage insurance (LPMI), via HARP, the new home loan’s mortgage insurance requirements could not change.
Since its launch more than four years ago, the Home Affordable Refinance Program has helped more than 2 million U.S. households and, because of recently-falling mortgage rates, today’s HARP homeowners are setting payment-savings records among all of HARP’s households dating to 2009.
HARP was launched in 2009 and was geared at homeowners with mortgages from 2006-2008, when mortgage rates lived in the mid-6 percent range, and were sometimes north of 7 percent.
This is why today’s refinancing households often experience a 2-percentage-point mortgage rate decrease or more via the Home Affordable Refinance Program. The payment savings are huge. It’s among the reasons why HARP remains so popular.
Comparing the Before-and-After payments of a typical HARP refinance :
- Original mortgage from April 2007 : $400,000 at 6.50%; Payment of $2,528.
- HARP refinance of same mortgage today : $368,000 at 3.50%; Payment of $1,652.
Via HARP, the homeowner saves $875 monthly. That’s a 35 percent payment reduction and the math works at all loan sizes and in all cities.