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HARP 2.0 Mortgage Refinance Loan Program Tips

By Daniel Cohen Apr 15, 2013
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Use a HARP refinance for your underwater home

HARP 2.0 Mortgage Program Allows Homeowners to Refinance to Current Low Interest Rates.

Editor’s Note: There have now been over 2 Million HARP loans finalized. Over 1 million were made in 2012, after the HARP 2.0 program was expanded.  Some lenders are stricter on credit scores and some are restricting LTVs, so be sure to shop around. Bookmark this page and check back regularly, as Bills.com will continue to update this page as HARP evolves.

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The Home Affordable Refinance Program (HARP) allows owners of underwater homes to refinance to today’s low interest rates. Refinancing is typically not possible for owners with little or negative equity. The key requirement for HARP eligibility is that the home loans must be owned by Fannie Mae or Freddie Mac.

The Federal Housing Finance Agency (FHFA) and Administration’s hopes for HARP is it will both stabilize the housing market and boost the overall economy by putting extra dollars in the pockets of consumers who are likely to spend them. The FHFA is conservator of Fannie Mae and Freddie Mac, and is the chief regulator of Fannie, Freddie, and the 14 housing-related GSEs and Federal Home Loan Banks.

Mortgage experts are optimistic about the new HARP. “Although there is still a good deal of uncertainty surrounding the specifics of how the expanded HARP program will be implemented at the individual lender level, the November 15 announcements from Fannie and Freddie do provide a source of encouragement for the equity challenged segment of the market,” said Peter Citera, vice president at Chicago Bancorp and mortgage education director at the Real Estate Institute.

Approximately 4 million Fannie and Freddie borrowers owe more on their mortgage than their homes are worth. Across the US, nearly 11 million are underwater, or about 22.5% of all outstanding loans, according to CoreLogic, a data provider to mortgage underwriters. About 2.4 million hold less than 5% equity in their homes.

HARP At a Glance

HARP has changed over time. In October 2011, the Obama Administration announced comprehensive rules for the new HARP, which people in the industry called “HARP 2.0.” In November, the Federal Housing Finance Agency (FHFA) expanded HARP and announced updated guidelines, which are discussed below. On March 19, 2012, the start of the automated loan approval systems expanded homeowner’s choices in lenders.

HARP allows homeowners facing difficulties refinancing their mortgage through conventional methods to apply for a refinance of their mortgage. A homeowner that is current with their monthly payments but unable to refinance due to a drop in the value is the typical prime candidate for the HARP program. The ultimate goal is to allow a homeowner to do a mortgage refinance for a lower interest rate and overall monthly payment. Here are the general eligibility guidelines for HARP:

  • There is no loan-to-value cap in the new HARP, for fixed-rate loans. This is the most significant change of HARP 2.0. Under previous versions of HARP, the LTV could not exceed 125%.
    March 2012 Update: Perhaps the biggest news in the November 2011 announcement by Fannie Mae and Freddie Mac was that HARP 2.0 would allow for unlimited LTV loans. This went into effect in December 2011 for loans processed by the original lender through the manual underwriting systems. With the opening of the automated systems in March 19th the expectation was that lenders would apply these standards to all new HARP loan applications. The big surprise, and disappointment for many, is that some of the lenders have issued stricter guidelines that limit the LTV to the previous HARP 1.0 125% level or lower. 
  • The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac (see Fannie or Freddie loan? table below).
  • At the time you apply, you are current on your mortgage payments. You can have one 30-day late payment in the past 12 months, but none within the past six months.
  • You have a reasonable ability to pay the new mortgage payments. Editor’s note: Fannie Mae removed the "reasonable ability to pay" clause.
  • The refinance improves the long-term affordability or stability of your loan.

HARP Changes for Lenders & Effects on Borrowers

The following is a summary of key changes found in HARP 2.0. Some key underwriting details are not yet announced, and are expected to be released before March 2012.

Limited Liability

What’s new: A key provision of the new HARP is that it limits lenders’ liability in cases of loan default. Essentially, Fannie and Freddie will not force the lender to buy back a non-performing loan.

Effect on you: This change should greatly expand HARP’s reach. Lenders will be much more eager to offer HARP loans, where they were previously reluctant. With more lenders participating, you will have an easier time getting a HARP mortgage.

Lender Fees Dropped

What’s new: Fees that Fannie and Freddie charge lenders for high LTV loans are being cut.

Effect on you: The reduced fees are passed on to you, making your loan cheaper. If you are financing to a 15-year or 20-year loan, the fees are cut even further.

Income Requirements Relaxed

What’s new: As long as your new HARP monthly payment is not more than 20% greater than your current payment, specific credit and income guidelines do not apply. The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined).

Effect on you: A high DTI is not enough to automatically disqualify a borrower. Also, if your family is now a one-income family when it was a two-income family on the original loan, you only have to show proof of one income, as opposed to conventional loans where all borrowers listed on the application must document income.

December 2011 Update: HARP 2.0 debt-to-income requirements have changed. According to a Fannie Mae announcement on December 20th,2011, lenders will not longer have to demonstrate that the borrowers have a “reasonable ability to pay, unless the loan payment increases by 20% or more.” This applies only to loans borrowers do with their current lenders through the manually underwritten Refi Plus system. Loan applications that go through the automated DU system must meet the basic DU 45% maximum debt-to-income requirement.

Credit Score Requirements Relaxed

What’s new: The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined).

Effect on you: A low credit score is not enough to automatically disqualify a borrower.

March 2012 Update: “It is important for borrowers to be aware that individual lenders are implementing their own underwriting overlays,” said Craig Repmann, managing partner, Heritage Mortgage Banking Corp. “For example Fannie and Freddie do not have a FICO score requirement to qualify for a HARP mortgage, but most lenders are requiring a minimum FICO score. It is going to be difficult for borrowers with a FICO score below 620 to qualify for HARP 2.0. There are some lenders out there doing HARP 2.0 with FICO scores below 620, but it will take some effort to locate these lenders.”

Underwriting Requirements Relaxed

What’s new No. 1: Mortgage Payment History: A HARP lender can approve a loan that has one late mortgage payment in past 12 months, as long as it did not take place in the last six months.

Effect on you: You won’t be counted out for a mortgage late, when that could normally eliminate your ability to get refinanced at the lowest rates available. If you have a recent mortgage late, you can still apply for HARP, once you meet the relaxed mortgage late requirements.

What’s new No. 2: Relaxed Foreclosure & Bankruptcy rules: Your HARP loan could be approved, regardless of how recently a borrower filed bankruptcy or experienced a foreclosure.

Effect on you: Normally, if you filed for bankruptcy or experienced a foreclosure you would have to wait years before you could successfully refinance.

Occupancy Requirements Relaxed

What’s new: Owner Occupancy: HARP loans are no longer restricted only to owner-occupants.

Effect on you: You can now use HARP to refinance your second home or investment property.

Lenders Must Show a Borrower Benefits

What’s new: Lenders must show that the HARP mortgage borrower derives one or more of the following four benefits in the new loan:

  1. Reduce the size of the monthly payment
  2. Change to a more stable loan product, such as moving from an adjustable-rate mortgage to a fixed-rate mortgage
  3. Reduce the interest rate
  4. Reduce the loan amortization term (moving to a shorter-term loan)
Relaxed Condominium Requirements

What’s new: HARP eligibility used to require that no more than 10% of units in the complex be owned by one person and that no more than 20% of owners in the complex be behind on their HOA dues. These requirements are now removed.

Effect on you: More condo owners will now qualify for HARP. If you own a condo, your qualifying for the HARP program is no longer dependent on your neighbors’ finances.

“Condominium owners have perhaps the best reason to be optimistic; lenders are being relieved of the responsibility (for HARP refinance loans only) to ensure that condo projects meet the often strict project approval requirements of Fannie Mae and Freddie Mac,” Citera said. “Borrowers living in condominium projects that have seen a sharp increase in the number of renters, or those that have experienced some level of budgetary stress, will be much more likely to find relief under HARP 2.0 than they have under existing programs (as long as their loans are owned by Fannie or Freddie).”

Recourse, Non-recourse, and Anti-deficiency

There has been a large increase in the number of HARP loans since March, 2012, when Fannie and Freddie updated their automated loan underwriting/approval software. Before then lenders could approve HARP mortgages by underwriting the loans manually. Loans underwritten manually expose the lender to greater risk because if a manually underwritten loan defaults, the lender is required to buy back the loan.

Before refinancing, borrowers should know whether their current loan is a recourse or non-recourse loan and also be familiar with their state’s anti-deficiency laws. Refinancing a non-recourse loan could expose the borrower to responsibility for a potentially huge financial obligation where no such obligation currently exists.

Basic HARP Requirements

Not every upside-down home qualifies for HARP 2.0. Here is a summary of the basic requirements:

  1. Loan must be owned or guaranteed by Fannie Mae or Freddie Mac
Fannie or Freddie loan?
Source: Fannie Mae & Freddie Mac.
Fannie Mae lookup Freddie Mac lookup
Fannie Mae or Freddie Mac must own your home loan for you to qualify for HARP.
  1. Loan was sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  2. Loan was not refinanced under HARP previously, unless it is a Fannie Mae loan that was refinanced under HARP from March through May, 2009.
  3. Loan’s current loan-to-value (LTV) is greater than 80%.

More About HARP 2.0

Many readers have asked Bills.com about mortgage insurance and how it may impact qualifying for HARP 2.0. Mortgage insurance on a loan does not block a refinance under HARP 2.0 automatically. See the Bills.com resource Mortgage Insurance and HARP Refinance to learn more.

Readers who do not have Fannie, Freddie, or other GSE loans are not eligible for HARP 2.0. In late January 2012, President Obama proposed a similar plan for non-GSE home loans. See Obama Refinance Plan for more information on this proposal and the Bills.com article on "HARP 3.o," that discusses other proposals to make refinancing possible for borrowers who have not yet been able to fit into existing programs.

More HARP updates will be released both by lenders and by Fannie and Freddie, so keep checking with Bills.com to stay updated on details of the new HARP program.

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Comments (1587)


Marc R.
C/o Cherry Hill, NJ  |  April 12, 2013
During the summer of 2012, I applied for three investment refinance loans through the HARP program. The mortgage company ordered three appraisals with two different appraisal companies. As a result, one of the appraisers valued two of the properties equal to the balance of the mortgages. However, the second appraiser valued one of the properties 30,000 less than the mortgage balance. After all was said and done, the mortgage company denied the loans because the underwriter would not accept the higher appraisal, which cost me $1,200. Needless to say, I'm still looking for a refinance company. Does the scenario sound reasonable or did I get hoodwinked? Thanks
Bills.com
April 14, 2013
Based on the information that you provided, your LTV, based on the new appraisals was at least 100%. Therefore, I am not sure why your application was turned down. I suggest that you contact the lender, asking them to send you a detailed explanation. If you not satisfied with their response, then you might wish to submit a mortgage complaint with the CFPB.
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Joseph W.
Brooklyn Heights, OH  |  April 15, 2013
Over 90% of the time, Fannie Mae/Freddie Mac does not require an appraisal at all. My lending institution abides by their guidelines so most likely, you won't need your homes appraised. Also, my lending institution has no LTV restrictions for Fannie Mae loans but Freddie loans are case by case basis. I believe I can help. Please let me know if you have any questions Thank you, Joseph Wallace Senior Mortgage Banker
Steven H.
Meridian, ID  |  February 18, 2013
Anyone happen to have any idea what the absolute latest might be to try and get a refi via HARP? I know the program ends currently on 12/31/13. But I'm cleaning up all my debt and am hoping to try and refi as late as I possibly can. Thanks! :)
Bills.com
February 25, 2013
Steven, there is no way to know whether the deadline will be extended beyond the 12/31/13 date. However, were I to guess, I would say that the deadline will be extended, if there remains a significant number of borrowers who could possibly qualify. It is a fact that the protections of the Mortgage Debt Forgiveness Relief Act were extended, so it seems reasonable to infer that the same may happen to HARP.

In your case, you said you need to clean up your debt. Are you sure that you need to do that in order to qualify? If you shop around and are told that you need to take a specific action, find out if that is a HARP guideline or a restriction (or 'overlay') imposed by the lender. Some lenders have tighter guidelines than others, so if it is not a program guideline that you're violating, then keep shopping for a lender to work with you.
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Steve H.
Meridian, ID  |  April 10, 2013
My problem is my loan was recently transferred to Green Tree from having been with Bank of America for years. Green Tree appears to be 1 of the worst loan servicers ever. The worst thing is, I was beginning to do a HARP refi with B of A, but within a matter of a couple of days my mortgage was transferred to Green Tree. I know I can do a HARP refi on my property. B of A said they would gladly do 1, but now that I'm with Green Tree they do not seem to want to do any HARP refi's at all. I've read TONS AND TONS of horrible reviews about them online. My problem is my DTI is too high to be able to go with someone else. Since Green Tree won't help me or anyone for that matter. So what other choice do I have besides to just continue paying down my debt till I can get it low enough so that I can be able to refi with some other lender. :( If only I'd tried doing a HARP refi with B of A just a few days earlier!!! Now I'm stuck. I might not even be able to pay off enough debt by the end of this year. I may be only a couple of months to late. Which is why I'm hoping like hell they extend the date. Or... they change HARP so that you can have a max DTI with other lenders and just your current servicer. My DTI is around 70%. I've talked to quicken about doing a loan with them but my DTI is just a bit too high. So I just need to keep paying down the debt since my current servicer Green Tree will not help me. So I have 2 questions. 1. Will HARP be extended past 12/31/13? 2. Will HARP get rid of the max DTI limits if you go through a different lender other than your current 1? If it's a yes to #2, then that would be great because I'd be able to do a HARP refi right now. Luckily enough I was able to do a HARP refi on my investment property since B of A still services that loan. I was able to get it down to a 15 year at only 3.1%. Green Tree on the other hand just sucks and is EVIL. Why is there so much government intervention with other big banks but NOT Green Tree?!?! Doesn't make any sense.
Bills.com
April 14, 2013
The good news is that the HARP program has been extended until December 31, 2015. Hopefully that will leave you enough time to pay down your debt and bring down your DTI to an acceptable level.

There still is no change in the DTI requirements, although the Boxer-Menendez Refinance Bill was re-submitted for the third time in 2013.

The government cannot force a lender to participate in the program, although hopefully, it will offer the same terms for all banks, as proposed in the Boxer-Menendez Bill.
Karen A.
Modesto, CA  |  January 26, 2013
On July 9, 2012, we started a refinance of our primary residence with Envoy Mortgage, who said it would take 5 weeks to close, with a closing date of August 17, 2012. On July 18, 2012, the loan was given to underwriting at CMG Financial with a close date of August 17, 2012. August 15, 2012, underwriting hadn't gotten to the loan, but Envoy said we could probably get a lower interest rate of 4.25% instead of our 4.75% rate. September 15, 2012, still nothing from CMG. Finally on November 29, 2012, CMG stated we needed an impound account and additional paperwork was needed to verify we had funds. I found a Facebook account for CMG Financial and left a message on December 9, 2012, asking why it was taking 5 months to do our loan. Philip George contacted us and actually speeded up the process some. Turn around on paperwork takes awhile, CMG doesn't look at any paperwork until they've held it for 3 days. On December 27, 2012, we received the HUD 1 document, CMG/Envoy had information on the HUD 1 that wasn't in the GFE, they now needed almost $3000.00 to close the loan but the interest rate was 4.25%. The HUD 1 would have to be corrected since it didn't have correct information on it, it said we had to pay for the impound account but on the bottom of the form it said we no longer needed an impound account. After 6 months of resending updated forms, verifying employee and salary information monthly, continuing requests for additional information, email follow ups to Envoy and CMG Financial to expedite the process, months of delay and the erroneous HUD 1, we cancelled the loan. On December 31, 2012, we went to Bank of America, they gave us 3.875% on a loan, told us it would take around 90 days to close. We signed papers on January 25, 2013, with closing on January 29, 2013. Loan is 3.875% and we needed to pay $64.17. The loan approval took 15 days, The Bank of America experience was terrific, we submitted documents once and our Harp refinance was done. Because of our terrible experience with Envoy Mortgage and CMG Financial, we would not recommend them to anyone.
Phil G.
East Providence, RI  |  December 26, 2012
Any chance of the government changing the law so people who have previously refinanced in 2010 with rates in the low 5% range, can refinance again?
Bills.com
December 27, 2012
Phil, the different "HARP 3" proposals I have seen have not specified that loans like yours will be eligible for refinancing. It is possible that whatever is put into place (if anything is put in place) will help you out, but it is also possible that it won't. All you can do is keep your eyes on the news and to contact your elected representatives with your point of view.
Mark M.
Elk Grove Village, IL  |  December 11, 2012
My loan was sent to Fannie May on the 21st of May 2009, they took it over on June 1st. So one day late, how is that make sense? They got it earlier, but didn't put it into effect until June 1st. Is there anyway to fight this date so i can qualify? I have insanely good credit, no missed payments, just don't have the same income i did when i got the house.
Avatar
G M.
Waldorf, MD  |  December 20, 2012
Just like the guy stated on his comment on Dec 11 2012. My wife and I did a refinance and got the so called Streamline loan and had to pay MIP. We settled on our loan with Quicken on MAY 21th 2009. Thought everything was fine at the time. Went to refinance at lower rate this July 2012 and our FHA case number did state we refinance on MAY 21th 2009 but the paperwork didn't go into effect until JUNE 07 2009. WTF. The system is flawed and as talking to FHA last month they read the bylaws and told me there is NOTHING they can do with the way the rules are written. Although my loan was done before JUNE 1 2009 it must have a certain case number in my file/paperwork. NOT FAIR. I don't like bankers, never have and never will. Funny thing, the GOP is still protecting big business while people like myself that have 780 credit rating, my wife's is 840 have money in the bank, make over 6k a month with a total mortgage of $1,700.00 a month, taxes, insurance MIP included with no other bills, we can't get a fair deal because now our home is under water. GOP. Go bail out the banks again and get your kickbacks, one day it will be the Red against the Blue and I believe it will be sooner than later. Sorry for my rant. 14 more months and then my MIP will go away and then I can refinance, until then BOA gets an extra $347 a month and FHA gets $109 MIP. NOT FAIR when we have always played fair. Happy Christmas everyone.
Mendel K.
Oak Park, MI  |  November 13, 2012
There is a major fault in the HARP program regarding a 2nd mortgage. Even if the 2nd lender is ready to subordinate their mortgage, HARP wont approve you unless the 2nd mortgage is with a BANK. If you have a 2nd mortgage with anything other than a bank for example, if you took a home improvement loan from a government branch you can't get approved by HARP even if they are ready to subordinate the 2nd mortgage!
Beth S.
Vancouver, WA  |  October 22, 2012
I have been reading Freddie Mac's Web site and I see there are new rules about income verification. I own a rental property in WA state, and purchased my primary home in May '11. I keep getting denied for a HARP for the rental. The servicer Nationstar just called and said they could do it now. But, 4.5%, 30 yrs, $6,313 in fees to get it. My current is 5.75%, purchased in '07. I called another lender and was told only the servicer can do without income verification. Is this true? I have great credit, never missed or late, and good income, no debt, but DTI is high because of new home. So what's the deal with Freddie's new rules?
Bills.com
November 02, 2012
What rule are you referring to? There is a new rule that allows the same servicer to qualify loans with LTV under 80% based on the same rules as those over 80%. A different lender doing a HARP 2 loan is still required to check your DTI. Those are high rates, but the lender is obviously taking advantage of the fact that you don't have other options.
Keith U.
Ocala, FL  |  October 11, 2012
Closed on a Freddie Mac Harp loan yesterday. I originally had an 80% loan with no PMI. I have a single family home as my primary residence in FL. I closed on a 15 year loan at 3.25% with $3-3.5K in closing costs on a $120K refi, you can probably get a slightly lower rate now that rates have dropped a tiny bit since I locked in. I really have to recommend my broker, he was able to give me a quote without doing a credit pull, I knew what my credit score was as well as other information like income, approximate home value etc so he was able to do a GFE and when I provided the SS# the rates he quoted me were the same.
Mary L.
Murrieta, CA  |  October 08, 2012
So I have read that new Harp (DU Version 9.0) will be released on October 20, 2012. I have read through much of it on efanniemae.com but still can't figure out if I would now qualify with other lenders or not. Our only problem that we keep hitting block wall with is DTI is too high. Only place that will refi us right now is BofA and we will not be going with them, due to fees and interest rates too high. We would be refinancing as non-owner occupied our loan to value is 81%, and DTI is about 71%. Reason DTI is so high, because we had to make our home a rental and will be claiming on next tax returns. But last 2 tax returns show our income way less because of deductions and such, so I guess they really penalize you for your tax returns as well. Any way, does anyone know of any lender in California that works with Harp and is up to date on the new release and know if we would qualify?
Maria V.
Alexandria, VA  |  October 08, 2012
I live in Virginia. I called Quicken Loans and was told Freddie Mac will not allow them to give a HARP loan on condos. I was told to check with my lender to see if they could handle my refi under HARP. I called my lender and was told that because I had mortgage insurance I couldn't refi under HARP. I thought that was the whole point of the HARP program? I'm really annoyed by this. Any suggestions?
Bills.com
October 10, 2012
I understand your frustration, especially given the fact that the Freddie HARP rules do not disqualify you for having mortgage insurance or owning a condo. Lenders can set their own, stricter policies, called overlays.

Overlays vary from lender to lender. I suggest that you continue to speak with lenders. Rates are so low right now that you probably have a lot to gain if you can find the right lender.
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