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The government’s Home Affordable Refinance Program (HARP) is misunderstood by the very homeowners who might benefit from it, and that’s unfortunate. The refinance program saves eligible homeowners an average of $200 a month. Some save even more.

If you're underwater on your mortgage, HARP may be able to help. (Thinkstock)

UPDATE: Originally slated to expire at the end of 2015, it was announced on May 8 that both the Home Affordable Modification Program [HAMP] and the Home Affordable Refinance Program [HARP] will be extended for an extra year, until the end of 2016.

Federal Housing Finance Agency Director Melvin L. Watt said that since both programs were launched in 2009 they have provided “critically important relief for many borrowers by allowing them to lower their monthly payments and, as a result, have prevented many foreclosures.”

Can HARP or HAMP help you? Read on to learn more.

When Steve Cohen, 51, purchased his 100-year-old Victorian home in Rockville Centre, Long Island, in 2002, interest rates hovered between 7 and 8 percent. But over time rates dropped, and he refinanced to 6.5 percent in May 2009.

As interest rates continued to drop, he hoped to refinance again, this time under the government’s Home Affordable Refinance Program (HARP), introduced in 2009 to help borrowers who were “underwater” (meaning they owed more on their home than its current value).

At the time, HARP required that the mortgage acquisition date (when it was sold to Fannie Mae or Freddie Mac) be prior to May 31, 2009 — a deadline Cohen’s loan had missed by days. “It was frustrating,” he recalls.

However, two years ago the Federal Housing Finance Agency (FHFA) updated HARP’s requirements, changing “acquisition date” to “origination” date. That meant Cohen, who had previously been turned down for a HARP loan, could now qualify.

He was able to refinance under HARP to a new loan with a 4.5 percent interest rate, which lowered his monthly mortgage payment by $300.

Who Benefits?

According to the FHFA, borrowers most likely to benefit from HARP have a remaining balance of $50,000 or more on their mortgage, more than 10 years of payments left, and a mortgage interest rate that is at least 1.5 percentage points higher than current market rates. “Even if your loan has an interest rate that’s closer to current rates, you might still benefit, so it’s worth asking your lender,” notes Blake Hampton, Fannie Mae’s HARP program manager.

The FHFA says you may be eligible for HARP if you meet all the following criteria:

  • You are current on your mortgage, with no 30-day+ late payments in the last six months and no more than one in the past 12 months

  • Your home is your primary residence, a 1-unit second home or a 1- to 4-unit investment property.

  • Your loan is owned by Fannie Mae or Freddie Mac.

  • Your loan was originated on or before May 31, 2009. By using the loan look-up tools below, this date will be made available to you.

  • Your current loan-to-value (LTV) ratio must be greater than 80 percent. Calculate your LTV ratio with this tool.

With the program scheduled to expire at year-end [UPDATE: That deadline has been extended to the end of 2016], FHFA is doing a final push to promote HARP in communities where many HARP-eligible borrowers live and has published a mapof HARP-eligible loans in each U.S. state. The FHFA estimates that, on average, these borrowers could lower their mortgage payments $200 a month — or $2,400 a year — with a HARP refinance.

Lenders are pushing too. “We review customer files to see which would qualify for HARP and save money by refinancing,” explains Staci Titsworth, a regional manager for PNC Mortgage. “We reach out to those customers and try to interest them in the program.”

So What Holds Them Back?

Some borrowers remain apprehensive about the program and the “mortgage process in general,” says Titsworth. “We spend time educating the customer and getting them comfortable with the process and guidelines.”

“They think there’s a catch,” agrees David Zilkha, a loan officer with Chase. “I answer a lot of questions like, ‘What’s in it for Chase?’ Borrowers fear there will be hidden costs.”

Lenders say other misconceptions about the program include:

  • The loan term having to reset for another 30 years, when, in fact borrowers can opt for shorter terms like 10 or 15.

  • The loan has to be underwater. “The program is available to anyone who meets its guidelines,” advises Zilkha. “You don’t have to be underwater.”

  • You can’t qualify if you’re self employed or had a drop in income. Cohen left a job on Wall Street two years ago to start Living Staten Island, an online deal website. “But that was something the lender was able to work with,” he says.

  • Only primary residences can be refinanced. Marlene Wilson, 55, of New York recently refinanced two investment properties with HARP, lowering her monthly payment on one by $400 and the other by $450.

  • You’ll have to pay private mortgage insurance (PMI) on the new loan. “That’s one of the benefits of the program. If you aren’t paying PMI now, you won’t have to pay it on the refinanced loan,” says Titsworth.

Is HARP Right for You?

Lenders point out that HARP is one of several refinancing options available to eligible homeowners. But HARP is unique — it’s the only widely available refinance

program that enables eligible borrowers with little to no equity in their homes to take advantage of low interest rates and other refinancing benefits.

“There are a lot of programs out there,” adds Wilson. “You have to find what’s best for your situation — it could be HARP.” Before refinancing her investment properties Wilson refinanced her primary residence, lowering her $1,900 monthly mortgage payment to $1,450, so her total savings with HARP has been $1,300.

“If you don’t know about this program or think it’s not for you, ask a lender. It can be tremendously beneficial,” Wilson says.

To find out if you may qualify, Titsworth suggests contacting your existing mortgage company to find out if they participate in the HARP program. (If they don’t a list of participating lenders can be found on There’s really no downside, she says. “It shouldn’t cost anything just to get information.”

Zilkha advises that if you are turned down, ask the lender why. “It could be a late mortgage payment 11 months ago is preventing you from qualifying and the answer will be different a month later, or maybe the person you called didn’t have experience with the program,” he says. “You may need to keep trying.”

Notes Zilkha: “The bottom line I tell borrowers is that HARP can lower your payments, rate, and/or your term. That appeals to most of them.”

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