The Story Behind HARP

The 2008 financial crisis caused U.S. home prices to plummet, leaving millions of homeowners in a difficult position. Many had purchased homes at peak prices, and their mortgage balances suddenly exceeded their property’s market value. This situation, known as being “underwater” or “upside-down,” made it nearly impossible to refinance. Lenders were unwilling to offer new loans on properties worth less than the amount owed, fearing losses if the homeowner defaulted.

This trapped responsible homeowners who were still making payments but couldn’t access lower interest rates or switch from risky adjustable-rate mortgages to stable fixed-rate loans. In response, the U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA) launched the Making Home Affordable® (MHA) program in 2009, with HARP as its flagship initiative. The goal was to provide a lifeline to these homeowners, helping to prevent foreclosures and stabilize the fragile housing market.

How Did HARP Provide Relief?

HARP created a unique refinancing path that bypassed traditional lending barriers. Ordinarily, lenders heavily scrutinize the loan-to-value (LTV) ratio. HARP, however, allowed homeowners with LTV ratios exceeding 125% to refinance, provided their mortgages were owned or guaranteed by government-sponsored enterprises Fannie Mae or Freddie Mac.

Key program features included:

  • High LTV Allowance: Homeowners could refinance even with little to no equity.
  • Reduced Documentation: In many cases, a new appraisal was not required, saving time and money.
  • Focus on Payment History: Applicants needed a strong payment history, with no more than one 30-day late payment in the last 12 months.

By guaranteeing these loans, Fannie Mae and Freddie Mac reduced the risk for lenders, enabling them to approve refinances that would otherwise be denied. This allowed homeowners to secure lower interest rates, reduce monthly payments, and improve their financial stability.

Who Was Eligible for HARP?

To qualify for a HARP refinance, homeowners had to meet several strict criteria:

  • Their mortgage had to be owned or guaranteed by Fannie Mae or Freddie Mac.
  • The loan must have been originated on or before May 31, 2009.
  • They needed a consistent payment history.
  • Their current LTV ratio had to be greater than 80%.
  • The property could not have been previously refinanced through HARP, with limited exceptions.

What Is the Legacy of HARP?

HARP officially concluded on December 31, 2018. According to the FHFA, the program helped nearly 3.5 million homeowners refinance their mortgages. It is widely regarded as one of the most effective crisis-era programs for preventing foreclosures.

While HARP is no longer available, Fannie Mae and Freddie Mac now offer high-LTV refinance programs that continue its mission:

  • Fannie Mae’s RefiNow™: Helps eligible homeowners secure a lower interest rate and monthly payment.
  • Freddie Mac’s Refi Possible®: Offers similar benefits for homeowners with Freddie Mac-backed loans.

These programs, while different from HARP, provide modern solutions for homeowners with limited equity who wish to refinance.

External Link for Further Reading:
For a detailed history and impact analysis of the program, you can review reports from the Federal Housing Finance Agency (FHFA).