The government’s Home Affordable Refinance Program or the HARP Refinance Program has been adjusted in order to attract more borrowers. Since its launch in 2009, right after the United States real estate market crisis hit, this refinancing program has only succeeded in getting less than 10% of the target underwater borrowers into the program. This refinancing program was specifically set up by the Federal Housing Finance Agency (FHFA) in order to help those whose homes are already valued lower than their mortgages are refinanced for lower mortgage repayments. Due to various reasons that include the loan-to-value cap, not a lot of borrowers qualified into the program. With the recent adjustments and expansion of the refinancing program, the government hopes to be able to accommodate more of the borrowing public – a move that they foresee to stimulate consumer spending and boost the economy too.
The most notable adjustment made to expand the coverage of the HARP Refinance Program (also referred to as HARP 2.0) is the lifting of the loan-to-value ratio requirement. When the program was launched, the LTV cap was set at 105% and then later on raised to 125%. This means that those whose outstanding mortgages amount to as much as 25% of their property’s value can apply for refinancing under the program to enjoy better rates. Late in 2011, this LTV cap was lifted to allow a broader customer base of eligible borrowers to benefit from the program. Unlike other federal loan modification programs, this program targets only those that are current in their mortgage payments and those with properties that were guaranteed by Fannie Mae or Freddie Mac on or prior to May 31, 2009.
Other adjustment to the HARP Refinance Program include more relaxed underwriting policies particularly involving credit score requirements, debt-to-income ratio limits, and mortgage payment history allowances. Some contention still surrounds the relaxation of credit score requirements since the lending institutions offering HARP still follow their own FICO score minimums – most of these lenders allow only those with FICO scores not less than 620 to avail of this refinancing option. As for the debt-to-income ratio limits, the manual HARP system allows for refinancing without having to show proof of “reasonable ability to pay” unless the resulting mortgage payments come up to at least 20% more than their original payments. This makes it possible even for those whose family financial status has changed drastically from what is indicated in their original loan documents. Even those that have had 30-day late payments within the past year, but not within the last six months, can still avail of the HARP Refinance Program.