What is HARP 3.0?

Surburban Home
HARP 3.0 would be the second expansion in the Home Affordable Refinance Program, which was launched in March 2009 by the Federal Finance Housing Agency. The program is geared towards borrowers who are up-to-date on their Fannie Mae or Freddie Mac mortgages and would like to refinance their homes, but whose loan-to-value (LTV) ratios are above the 80 percent level.

Prior to HARP, borrowers with LTVs above 80 percent would have been required to take on private mortgage insurance with their refinance, which would have negated the savings of the refinance. Under HARP, borrowers with LTVs at or under 125 percent were eligible for refinance.

In December of 2011, HARP policies further expanded the program, removing the LTV cap all together.

During his 2013 State of the Union address, the President said he planned to expand the Home Affordable Refinance Program to borrowers with Alt-A and jumbo mortgage loans. The plan has not yet been finalized.

The Home Affordable Refinance Program

After the housing bubble crash in 2006, many borrowers found themselves underwater on their home loans. A home is underwater when the appraised value of a home is less than what the borrower owes on his or her mortgage loan. As interest rates began to drop, many underwater borrowers were unable to refinance without being forced to take on a private mortgage insurance. HARP allowed borrowers with LTVs over 80 percent to refinance at today’s low rates.

To qualify for HARP, borrowers had to meet the following criteria:

  • Their mortgage loan had to be guaranteed by Freddie Mac or Fannie Mae, or acquired by the company on or before May 31, 2009
  • The homeowner had to be current on their mortgage, with no 30-day late payments within the last six months and no more than one late payment within the last year
  • Their LTV ratio had to exceed 80 percent
  • The homeowner could not have previously refinanced under HARP, unless the refinance happened between March and May of 2009
  • The refinance would have to benefit the borrower in some way – for instance, by lowering the borrower’s monthly payment or my stabilizing the loan’s interest rate with a switch from an adjustable-rate mortgage to a fixed-rate
HARP 2.0

In December of 2011 HARP was expanded to what mortgage industry professionals called HARP 2.0. Under HARP 2.0 the LTV percentage cap was removed completely. The expanded version of the bill also allowed borrowers to refinance the mortgage with any lender, not just the lender who issued their original loan.

HARP 3.0?

HARP 3.0 has not been passed. In 2012 State Senators Barbara Boxer and Robert Menendez drafted the Responsible Homeowner Refinancing Act of 2012 to make it even easier for borrowers to refinance. The bill failed, but Boxer and Menendez are trying again with the Responsible Homeowner Refinancing Act of 2013.

If approved, HARP 3.0 may expand the refinance benefits of HARP to borrowers:

  • Who have mortgage loans not guaranteed by Fannie Mae or Freddie Mac
  • Who have jumbo mortgages and Alt-A mortgages
  • Whose original mortgage was stated income, stated asset or both.
Congress met to discuss the bill in early February, but there is no word yet on when, if ever, the bill will be passed.