What is the Home Affordable Refinance Program (HARP)?

In 2009 the Federal Housing Finance Agency (FHFA) commissioned the HARP program to help Americans upside-down on mortgages to get approved for mortgage refinancing.

This is only available to people whose mortgages are already owned by Freddie Mae and Freddie Mac. Many Americans find themselves upside-down, or underwater, on their home mortgages, particularly after the housing bubble popped in 2008. To be underwater means that there is more owed on the loan than the home can serve as collateral for.

This can happen if a home loses a significant portion of its fair market value. To help consumers, but also the system itself, the HARP program was started in 2009 to help people get approved for refinancing. Refinancing arrangements can lower the loan payment amount, interest rate, or length of time that payments must be made.

The conditions are that an individual must have a history of making loan payments on time and that their mortgage must be owned by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac buy approved mortgages from banks to help give banks liquidity to make more loans.

The risk of making the loan was no longer the bank’s, effectively, and this is a large part of the reason that many bad loans were made and so many people defaulted on them, resulting in the crash of many financial pillars that were being partially held up by the Collateralized Mortgage Obligations, which are mortgage cash flows sold off as securities.

If a homeowner has already defaulted and is in danger of foreclosure, they could try to get a similar loan from the Home Affordable Modification Program (HAMP), but that program has a sunset date of December 31, 2016.