What is a HARP Loan?

The acronym HARP stands for Home Affordable Refinance Program. President Obama introduced the HARP loan shortly after taking office in 2008 to help make mortgage payments more affordable for many homeowners. The program works in much the same way as a traditional loan modification, but there are a few slight differences.

How a HARP Loan Works

Even though the HARP program is often referred to as a type of loan, it actually involves refinancing a mortgage. People who have mortgages with either Fannie Mae or Freddie Mac are eligible as long as they do not owe more than 125 percent of the appraised market value on their property and have not been more than 30 days past due on payments for at least one year. Homeowners who meet these requirements should qualify for new terms on their existing mortgages, which typically includes lower interest rates and payments.

HARP versus Loan Modification

A person trying to decide between a HARP loan and a traditional or wholesale loan modification may be better off to go with HARP if he qualifies for it. Sometimes loan modifications don’t really help that much, and the process of getting one to go through can be expensive because most mortgagors require trial payments to be made for at least three months. Even after the trial payments are made, there’s no guarantee the modification will go through. While loan modifications are occasionally helpful, Fortune magazine recently reported that loan modifications ultimately end up being failures for most homeowners who attempt them. However, a loan modification may be one of the only options available for a person who is delinquent on his mortgage because the HARP program is only open to people who are current.

Time Limit on HARP

Unfortunately, the HARP program won’t be around forever. As of 2011, the expiration date of the program is June 30, 2012. People who are interested in qualifying for HARP will need to apply before then. There is a small chance the the government may decide to extend the program beyond this date.