The HARP Refinancing Lifeline In An Ocean Of Debt

The last few years have seen some turbulent times in the home lending market. One of the ways that the Federal government has been helping homeowners to recover is through the Home Affordable Refinancing Program or HARP. The conditions of the market in the mid-2000s were so buoyant that even the most levelheaded buyers became swept away in the currents of the bubble.

The HARP program is intended to help homeowners by giving them more affordable monthly payments and allowing some financial room to breathe. There are some conditions that apply and it will only be worth the effort if the lower payments balance against the cost of refinancing into a HARP mortgage.

When real estate markets are stable or rising, adjustable rate mortgages (ARMs) are a low-cost option for the home. The problem is that many were sold to homeowners with extremely low “teaser rates”. The selling point was that they could re-finance away the risk, when prices went up further. Instead, the bottom fell out of the market and it caused many personal financial disasters.

The Bottom Line For HARP

HARP is specifically designed to help with mortgage payments; there are no options to withdraw cash from the equity of your home. The program is available to struggling homeowners with Fannie Mae or Freddie Mac backed home loans that were funded before May 31, 2009. Your loan to value ratio must be higher than 80 percent.

It may not be immediately obvious whether your mortgage is actually held by one of these two agencies. Your loan may be serviced by other entities, such as Bank of America and still Fannie Mae or Freddie Mac might be holding it.

The HARP basics are pretty straightforward. The program allows struggling homeowners to refinance on favorable terms that include reduced interest rates. That in turn reduces the payments. If you currently have an adjustable rate mortgage that qualifies, you can use HARP to lock-in a fixed rate.

There are also options with shorter terms that might enable you to build equity more rapidly. Closing costs, which are added to the balance, are lower because in most cases you will not be required to get an appraisal or get loan qualification. Recent improvements to the program have reduced the paperwork, which has cut down the processing times.

This Too Shall Pass With Time And Assistance

The inflated appraisals of the last decade tempted far too many buyers into taking on more than they could ultimately handle or into withdrawing equity that vanished with the market collapse. HARP has been one of the solutions that homeowners trapped in negative equity and high payments can turn to for help. It may not be right for your particular circumstances but if you find your mortgage note is held by one of the two eligible agencies then it could potentially be a lifeline to personal recovery.