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.
This article was updated on June 16th, 2021
December 15, 2015 - 4 min read