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HARP 3 Refinance

By Gretchen Wegrich Updated on 12/22/2014

Harp 3 Underwater HomeThe possibility of HARP 3 passing has underwater homeowners and mortgage experts alike buzzing with excitement. The expanded program would target underwater homeowners with mortgages not backed by Fannie Mae or Freddie Mac and those who don't otherwise qualify for the HARP program in its current form. 

What is HARP?

The original Home Affordable Refinance Program (HARP) was created to provide help for responsible homeowners who were current on their mortgages, but owed more than their homes were currently worth. In 2012, the revised HARP 2.0 waived loan-to-value requirements and provided affordable mortgage refinancing for close to 1 million U.S. households.

In 2013, the number of refinance loans is expected to be similarly strong –especially since the possibility of HARP 3 is gathering momentum. 

HARP 3.0: Help for More Underwater Homeowners

The possibility of HARP 3 (which the government calls #myrefi) was first mentioned in President Obama’s Jan. 2012 State of the Union address; HARP 3.0 would allow homeowners whose mortgages are not backed by Fannie Mae or Freddie Mac to refinance their underwater homes, taking advantage of historically low mortgage rates.

In theory, HARP 3 would offer assistance for:

  • An Alt-A borrower who improved their once-low FICO scores since the date of the mortgage loan origination
  • Self-employed homeowners who used stated income loan for their original mortgage but are now able to verify their income via federal tax returns
  • Prime borrowers who used a sub-prime mortgage because it was cheaper than a conforming mortgage
  • Wage earners who used a stated income or stated asset mortgage for the sake of convenience
  • Sub-prime borrowers who have responsibly met their mortgage terms and can verify all income and assets
  • Jumbo mortgage homeowners who live in high-cost areas; their original mortgages were for $417,000-$625,000.

If put into effect, HARP 3 will expand the existing qualification requirements for homeowners, offering refinancing options for non-Government Sponsored Enterprise (GSE) mortgages and mortgages with loan balances higher than teh conforming limits.  What does this mean?  Everyone who meets all of these requirements will be a candidate for using HARP to refinance.

When is HARP 3.0 going to happen? Will there be a HARP 3?

It is unknown when HARP 3 will be created (if ever), nor are the exact qualification requirements known. However, based on the previous HARP programs and what Washington D.C. officials have said, millions of additional homeowners stand to benefit from the creation of HARP 3. Recent changes, including the confirmation of Mel Watt as the new head of the FHFA have given new hope to homeowners and lenders. Mel Watt is considered consumer friendly and has spoken about the benefits of an expanded HARp program on several occasions.  

HARP Timeline

The original HARP, launched back in 2009, was:

  • A refinance program for Fannie Mae and Freddie Mac backed mortgages designed for homeowners who owed more on their home loans than the current value of their homes
  • A direct response to 2009’s housing bubble collapse
  • A program that waived some loan-to-value requirements (an estimated 1.2 million households in the United States took advantage of this from 2009-2011)

In 2012, HARP expanded and gave birth to HARP 2.0–which meant:

  • All HARP loan-to-value requirements waived in most cases (varies by lender)
  • Qualifying homeowners must have less than 20% equity in their homes
  • Homeowners must have paid their loans promptly for the past six months

The possibility of HARP 3 being introduced during 2014 could play an important role in the refinance mortgage market, offering relief to millions of homeowners who currently owe more on their mortgages than their homes are worth.

HARP 3.0 Mortgage and You

Where does that leave you? If you are an underwater borrower, but can’t find a refinance plan under existing options, you can take the following steps:

  1. Find out who owns your loan.
  • If your loan is a Fannie Mae or Freddie Mac loan check out the HARP 2.0 mortgage program. Discover exactly why you are being denied a refinance. It could be the lender’s overlays, or an inability to work with your mortgage insurance company. Even if one lender turns you down, don't give up.
  • If your loan is a FHA loan, consider an FHA streamline finance. It can be possible to refinance even if your LTV is above 100 percent.
  • If your loan is a non-conventional loan, follow this page for any updates about the HARP 3.0 mortgage refinance program.

    2. Continue making your mortgage payments. One of the continuing requirements for a HARP loan is on-schedule repayment. Even though the program allows one late payment (30 days) in the second half of the 12 months, many lenders refuse to approve loans if there are any late payments throughout the entire year before the application is submitted.

    3. If you are unable to make your payments, consider a modification. Recently, President Obama pushed for new HAMP guidelines. There has been talk of increased principal reduction programs. The HARP 3 mortgage program is not here yet.

It is likely that the current HARP 2 program will be expanded, increasing the amount of lenders participating in the program, increasing competition and decreasing lenders stricter underwriting guidelines, in order to make the program accessible to more borrowers.

A wider HARP 3.0 mortgage is less likely, but it is possible that some type of compromise will be reached enabling at least some of the underwater borrowers currently locked out of the HARP program to receive assistance.

If you would like to obtain a HARP refinance loan, visit our Lender411 Get a Quote page to conveniently receive interest rate quotes from nearby lenders in your region. Start comparing rates today and take the first step toward a smart HARP refinance.

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About The Author:
Gretchen Wegrich
Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.

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