HARP Mortgage Loans After the 2008 Housing Crash

In this article, we will cover the importance of HARP Mortgage Loans. We will cover how homeowners benefited from this loan program. The main reason for the creation of the HARP mortgage loans was to stabilize foreclosures. Foreclosures were at historic highs due to the 2008 financial crisis. Most homeowners owned homes with mortgages higher than the value of their homes.  We will cover the following bullet points:

• 2008 real estate and financial meltdown
• Underwater mortgages
• HARP Refinance Loans

The real estate market has never been hotter than from the 1990s all the way until 2007. Then the 2008 financial meltdown happened.

What Happens if the Housing Market Collapse

.The reason why HARP mortgage loans for homeowners with underwater mortgages were created and launched was due to the 2008 financial crisis. Today’s booming housing market has many experts thinking. Are we going to have another housing market crash?

Many expected a second financial and housing meltdown due to the coronavirus pandemic. However, the pandemic directed home values booming like never before. It went in the opposite direction. Many pre-approved homebuyers put their purchase plans on hold hoping home prices will stabilize.

We will update this previous blog on HARP mortgages so viewers can relate to the similarities between our previous housing boom and today.

2008 Real Estate and Financial Meltdown

Then the real estate, credit, banking, and financial crash of 2008 struck hard. Millions of homeowners who had equity in their homes have seen it evaporate before their eyes. Real estate values kept on going up and up. There was no sign of any correction for nearly 15 years.

Historically, real estate was believed to be the safest investment. Most conservative investors choose real estate as their top investment. Most Americans owned more than two homes. Getting a mortgage was very easy. No-doc loans were available to anyone.

Not only did homeowners lose their hard-earned equity in their homes, but they were also left stranded with underwater mortgages. If a homeowner has underwater mortgages, it means their loan balance is higher than the value of their homes.

HARP Mortgage Loans: Underwater Mortgages

Millions of homeowners bailed where they just turned in their keys to their mortgage lenders. They gave up their homes rented apartments and homes. Millions of other folks were forced into bankruptcy and foreclosure due to unemployment, under-employment, or business losses.  Small businesses that were in business for generations have gone out of business.

Industries Devastated by the 2008 Financial Crisis

Industries such as the real estate, mortgage, and construction industry were at a standstill. Half of the mortgage brokerage companies have gone out of business, filed for bankruptcy, or closed their doors.  Sectors of the mortgage business such as the subprime mortgage markets and no doc mortgage lending were completely regulated.

The whole mortgage industry went through an overhaul and lost half of its workforce. New regulations were implemented to avoid a second financial meltdown. Government agencies like the CFPB were created.

Creation of HARP Mortgage Loans

Bankruptcy and foreclosure rates have skyrocketed and set historical highs. For homeowners who had mortgage loan balances higher than the value of their homes and who wanted to stick the real estate collapse out, the government created the Home Affordable Refinance Program.

If your conventional conforming mortgage loan is underwater, the balance is higher than the value of your home, you may qualify to do a refinance mortgage loan without having any equity and/or having your mortgage loan balance higher than the market value of your home and without having to pay private mortgage insurance through the Home Affordable Refinance Mortgage loan program.

Basics of HARP Refinance

The Home Affordable Refinance Program was launched in April 2009. The loan program was created and launched to assist reward homeowners whose mortgage balance was higher than the market value of their homes. The goal of the loan programs was to prevent the foreclosure crisis from further escalating. In order to be eligible for a HARP loan, the homeowner needs to have a mortgage owned and backed by either Fannie Mae and/or Freddie Mac. The current loan needs to be backed by Fannie/Freddie no later than May 31, 2009.

More on HARP Mortgage Loans

The Home Affordable Refinance Program did not require appraisals. This was because the home mortgage loan balance is higher than the actual value of your home. HARP finally expired on December 31, 2015. The real estate market has been booming for the past several years where most homeowners have substantial equity in their homes.

What Happens If There is Another Housing Market Crash

One of the top questions Googled is ” Is there another housing market crash coming.” Nobody has a crystal ball. If someone has an answer that means they are talking out of their ass. However, housing data does look like another housing crash is promising. Home prices are skyrocketing like never before. There has not been a housing market correction since the 2008 housing meltdown. Interest rates are at historic lows, There is more demand for housing than inventory. There is no doubt the government will step in and create and launch another HARP-like mortgage program. Until then, we will keep on updating our viewers on this crazy housing market.

Brief Explanation of HARP Mortgage Programs in the USA in the Reconstruction Era After the 2008 Housing Crash

One of the historic initiatives the US government implemented to rescue parents with distressed homes, predominantly during the immediate aftermath of the 2008 housing market crash, is the Home Affordable Refinance Program (HARP). Below is a comprehensive look at HARP, its purpose, evolution, and impact.

Who is Eligible for the Home Affordable Refinance Program HARP?

As mentioned above, The Home Affordable Refinance Program was introduced by the US government face in 2009 as part of the initiatives to aid parents in recovering from the collapsed US housing bubble policy aimed quickly and specifically to meet the needs of the homeowners with:

• Mortgages are greater than the value of a house that a person owns.
• Roll the loans through FNMA and FHLMC with guarantee us or owned.
• Domicile owners who lost hope of refinancing due to decreased values of their houses.

What Are The Benefits of The HARP Program?

HARP was intended to achieve the following goals:

• Introduce a Low Refinancing Ceiling through which they would reduce the interest rate.
• Directly translating to a cut in the monthly mortgage repayment.
• Restructuring the mortgage would enhance the chances of retaining home equity while paving the way for shorter loan periods.
• Minimize any associated chances of defaulting or being foreclosed on any loans.
• Enhance the housing market by avoiding a situation where homes are abandoned.

Can You Outline the Eligibility Criteria You Must Meet to Qualify For HARP?

For HARP, People Needed to Fulfill the Following Requirements:

FHA, VA, or USDA Loans Not Accepted:

• Only First Fannie Mae or Freddie Mac Backed HARP Loans:

Ownership by Freddie Mac and Fannie Mae:

• The Borrower had to have either a loan owned or guaranteed by them.

Current on Payments:

• There should not have been more than 1 late payment in the last 12 months.
• Ideally, there should be no late payments within 6 months of the current month.

Loan-to-Value Ratio:

• Previously, harm was created only for loans with an LTV of 80 percent.
• However, changes were made to remove the 80 % limit for clients with negative equity.

Principal Elements of HARP

No Appraisal Requirement:

• HARP frequently permitted borrowers to refinance without requiring an appraisal of the home.

Sufficient Underwriting:

• Because of the lack of income or bad credit, borrowers did not have to follow normal underwriting criteria.
• Therefore, they were furloughed.

Lower Costs:

• The closing and other fees were reduced relative to what is usually noticed in refinancing procurement.

Simple Procedures:

• The program enabled eligible borrowers to do refinancing faster and more effectively than before.

Development of HARP

HARP underwent more than one update to increase coverage and expand accessibility:

HARP 2 0:

• This includes the removal of the one hundred twenty-five percent LTV limit so deeply underwater borrowers can qualify.

HARP 3.0 (Proposed but Not Implemented):

• It attempted to broaden coverage to include loans not owned by Fannie Mae and Freddie Mac.
• However, it was not implemented.

Program Extensions

The HARP program was meant to run until 2013. However, certain events prolonged it several times until it ended on December 31, 2018.

HARP’s Effects

Homeowners Helped In:

• Over 3.4 million homeowners were guided through the process of lowering the interest payments on their mortgages through HARP.

Economic Recovery:

• HARP enhanced consumer confidence by lowering monthly payments and stabilizing homeowners.

Defaulted Inside Misedging:

• HARP increased chances for borrowers to benefit by lowering default rates on homes they owed up to.
• Increased Housing Prices played a key role in the mental experiment of the home price crisis.
• They set the center of the new economy.

Criticisms of HARP

Despite its effectiveness, the HARP encountered certain challenges as follows:

Limited Scope:

• If a person had securities that were not part of the options, Fannie Mae and Freddie Mac loans on their loans.
• Then, there was no relief available aside from them.

Information Awareness Gaps:

• This program should have greatly aided many people.
• However, the issue arose due to government programs.
• Many inducing paranoia and mistrust were potentially eligible but never enrolled in these programs.

Lesser Payment Impact:

• The main goal of HARP was to pay less.
• But rather reduce payments altogether instead of concluding.
• In some cases, the borrowers still owe a fortune.

HARP Alternative Programs

In 2017, three specialized refinancings had been developed to assist homeowners after the expiration of HARP:

Fannie Mae High LTV Refinance Option:

• This program was offered to potential borrowers with a loan-to-value ( LTV ) ratio of more than 97.
• The borrowers are allowed to refinance loans granted after October 1, 2017.

Freddie Mac Enhanced Relief Refinance:

• This program was offered to a different set of borrowers.
• This program targeted borrowers with high LTV ratios who would have benefited from loans with lower interest rates.

Features that Are Important to Note from HARP

Acting Fast:

• HARP and similar programs reiterate the need for quick intervention in housing crises.

Understanding the Limits:

• One important aspect is ensuring entitled borrowers know what is available.

Willingness to Write:

• To reach out to more needy borrowers, tactics included giving borrowers the option of a high LTV ratio.
• Making the underwriting criteria more flexible.

HARP Frequently Asked Questions

Q1. I thought HARP was no longer available. Why am I still able to refinance using HARP?

• As some newer programs have come into play, eligible borrowers may still have options; however, HARP stopped after 12/31/2018.

Q2. As I understand, HARP is a handout that forgives loan balances to people who might have lost their jobs. Is that correct?

• That is not true. In fact, HARP loans do not ordinarily include a loan reserve or any principal forgiveness; they are about making funding easier by refinancing and reducing interest charges and monthly payments.

Q3. Is there a new program similar to HARP?

• Some options for high-LTV borrowers include the Fannie Mae High LTV Refinance Option and the Freddie Mac Enhanced Relief Refinance programs.

HARP enabled millions of homeowners to save their homes after the 2008 housing crisis and helped prevent foreclosures. While the program no longer exists, many follow-up programs seek to keep aiding needy borrowers. Suppose you are thinking about refinancing your mortgage. In that case, speaking with a mortgage specialist about the options available is highly advised, as there are plenty.

This article was updated on December 25th, 2024.