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Underwater Mortgage? There’s Hope With HARP


This is a guest post from Paul at Make Money Make Cents. Enjoy!

Times are tough. The unemployment rate is over 8%, the stock market is finally settling down after years of turmoil, and the housing market will be recovering from a 40% hit over many years. People are trying to save money any way they can. Refinancing your mortgage is a great way to save hundreds every month. Unfortunately, many people are finding that they owe more than their house is worth. Previously, this meant that they would be unable to refinance their mortgage, and would be stuck with their higher rate. Fortunately, the government has stepped in and created a program to help.


In 2009, the Home Affordable Refinance Program (HARP) was established by the government. The program, which is specifically for Fannie Mae and Freddie Mac held mortgages, provides an option for homeowners to refinance their “Under Water Mortgage.” Harp helps homeowners whose property value has fallen, causing them to no longer qualify for a traditional mortgage. There are a few criteria that must be met:

  • The borrower must be current on the mortgage at the time of the refinance, with a good payment history over the past 12 months.
  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • The current loan-to-value ratio must be greater than 80%

Recent changes to the HARP program:

  • The 125% loan-to-value cap has been removed.

The first step to take in refinancing under HARP is to check and see if your mortgage is serviced by Fannie Mae or Freddie Mac. If your mortgage isn’t owned by one of them, then you cannot use HARP. To check if it is owned by Fannie Mae, Click Here. To check if it is owned by Freddie Mac, Click Here.

What To Expect

So your loan is owned by Freddie or Fannie, and it was sold to one of them before May 31st, 2009. Now What? You will need to call your bank and tell them you want to refinance your loan under the HARP program. They will confirm that you qualify. If you do, there are a few criteria that your bank is going to require:

  • You must be employed or have some sort of income stream (Social Security, Pension, or even an investment with some restrictions).
  • There shouldn’t be a minimum credit score, but the lower your score, the more your rate will increase.
  • There may be an appraisal, depending on the bank. Of course the result shouldn’t matter due to the removal of the LTV cap.

If you have come this far, then you are close to the finish line, sort of. After applying with your bank, and paying an upfront application fee of around $400, an underwriter will be assigned to your refinance. The underwriter will review all of the aspects of the loan, they will verify your employment, pull your credit, order the appraisal, and check the title to make sure it is correct and that there are no other liens on your home. If there are other liens, your bank will inform you if you will be able to refinance, as well as require you to subordinate the second lien.

The entire process will generally take anywhere from 45-60 days. There are closing costs, and the amount depends on your credit, the loan-to-value, and a few other factors. Closing costs will depend on your bank, so make sure to ask them prior to applying. The $400 application fee is the only fee that should be required upfront. The rest of the costs can be rolled into your loan, but remember, you will be paying compounding interest on that amount. Last, refinancing under the HARP program will most likely cause a higher interest rate than quoted rates that you can find on Yahoo Finance or your banks front door. If the as-low-as mortgage rates are around 3.8%, your HARP interest rate may be around 4.8%. That is just how it is going to be, and they will not lower the rate for any circumstance. One good point to make is that if you were paying private mortgage insurance or PMI, that amount will not change when you refinance. That is a major benefit especially because the PMI rate has nearly doubled in the past few years.

Is It Worth It?

The only person that knows if it is worth it is you. I recently refinanced under the new HARP 2.0 requirements and was very happy with the experience. A simple way to calculate its value is to take the amount you will be required to pay in closing costs, and divide it by the quoted monthly savings. Let’s say for example, your closing costs will be $2000. If you refinance, you will save $190 a month. Divide $2000 by $190, and your answer is 10.5. It will take you 10.5 months in order to make up the closing costs. After those 10 months, that $190 a month is considered savings. If you are planning on moving in a year, then it probably is not worth refinancing. If you plan on staying in the house for 2 or more years, then call your bank and start that application.

Now is the time for anyone who is underwater on their mortgage to refinance. HARP is a great program allowing homeowners to take advantage of lower mortgage rates and save hundreds every month. If you have a mortgage and want to save, call your bank today. Find out if you qualify, begin the application, and start saving.

Housing Money Mortgage Payoff


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


    • Jai,

      Other than the two firms being taken over by the gov. and being careless, what do you not like about them?

  1. I was interested in HARP, but found out my loan isn’t owned by Fannie or Freddie. It stinks because I’d love to take advantage of the lower interest rates, but all hope is not lost. I don’t see the Fed upping rates anytime soon, so I have time to pay down my mortgage so I qualify for a refi. Luckily, I’m not too far underwater.

    • Maybe your loan will be purchased by them in the near future (and the terms change slightly) so that you could refi. If not hopefully with extra principal payments you can get the balance low enough!

  2. I’ve never heard of this program before, and it isn’t even that new. Why aren’t the banks letting us know about this option? We’ll totally have to check this out, our property lost a lot of value over the las couple years…

    • Most banks are trying to let their clients know about HARP. I don’t think many banks are sending generic letters out, but bankers and loan officers do call current clients to inform them. Good luck with your loan, I hope you qualify!

  3. I am going to avoid giving you tax advice. You would really need to talk to a tax adviser for write offs.

    I can tell you if you claimed the property as your primary residence, you will not be able to claim losses on the property when you convert it to an investment.

  4. I’m glad you were able to refinance. It was worth it for me as well. Saving a hundred plus every month is great!

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