Affordable Housing and Tax Credit Developments NationallyChanges to the Home Affordable Refinance Program (HARP)

October 25, 2011by George Danneman

The Federal Housing Finance Agency (FHFA) is modifying the Home Affordable Refinance Program (HARP) to enable more borrowers to refinance their mortgage at low interest rates.

In an effort to avoid future mortgage defaults and reduce credit losses for Fannie Mae and Freddie Mac, the Home Affordable Refinance Program (HARP) was introduced in 2009 to allow more borrowers the opportunity to refinance into a lower interest rate.  The program covers mortgages sold to Fannie Mae or Freddie Mac on or before May 31, 2009.  Although the Home Affordable Refinance Program (HARP) was originally expected to help 5 million borrowers, as of August 31, 2011, only 894,000 borrowers have refinanced through the program.

A significant change announced to the program is the elimination of a cap on how much a borrower owes.  Previously, borrowers that owed more than 125 percent of the market value of their homes were prohibited from participating in the Home Affordable Refinance Program (HARP).

In addition the following changes were also announced:

  • Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
  • Eliminating the need for a new property appraisal where there is a reliable automated valuation model estimate provided by Fannie Mae and Freddie Mac; and
  • Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

The Federal Housing Finance Agency’s (FHFA) Acting Director Edward DeMarco stated “[b]uilding on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by [Fannie Mae and Freddie Mac]…Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”

For more information see the FHFA news release and Q&A.

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