Home Affordable Refinance Program (HARP) Eligibility Requirements

The Home Affordable Refinance Program (HARP) is one of the many programs offered through the Making Home Affordable initiative. The initiative was passed in response to the mortgage crisis of the late 2000s. It aims to accomplish two primary objectives: first, to keep individuals in their homes if they are facing default and, two, to allow borrowers to capitalize on lower interest rates now offered as a result of the recession. If you qualify for benefits under the Home Affordable Modification Program (HAMP), which is the mother program for all Making Home Affordable programs, you will be eligible for HARP benefits.

Basic Requirements

The basic requirements set forth in the HAMP program are as follows:

  • The home must be your primary residence.
  • Your mortgage was originated before the cut off date of January 1, 2009.
  • You owe less than $729,750 on the home.
  • Your payments are more than 31 percent of your total monthly income.
  • You have experienced a qualifying event rendering you unable to continue payments, making default inevitable without help.

The last two requirements assure the program is going to the neediest of borrowers. If your payments are less than 31 percent of your income, you will be asked to simply restructure your finances in order to afford your mortgage. As a general rule, a mortgage payment less than 31 percent of your income is already "affordable."

Qualifying Events

The qualifying event is the factor most open to interpretation. This portion basically means that you were previously able to make payments but something occurred rendering you unable to continue. Job loss is a common example. If your rates adjusted to new levels, increasing your mortgage to more than 31 percent of your income, this could be a potential qualifying event. In this case, you will have to show you would be able to continue payments if the rate was readjusted.

Benefits of HARP

The main benefit of HARP is simple: you get to stay in your property at a new, lower monthly payment. You do not receive any financial or credit penalties in the course of refinancing. For lenders, the benefit offers much-needed relief from a risky loan market. Even though the profits on the loans will be cheaper if the rates adjust, lenders are willing to take profit decreases if they can assure the loans will not pass into default at the lower rates. Default is a worst-case scenario for lenders and borrowers alike.

Alternatives to HARP

If you qualify for HARP and are in the process of making the change but then miss a payment, you may be moved into a Home Affordable Foreclosure Alternative (HAFA) program instead. In this case, the lender and the Department of Housing and Urban Development agree default is inevitable on your loan even with a refinanced payment. You will be given the option to either short sell the property or move through a deed-in-lieu of foreclosure transaction. In both cases, you will be forced out of the home but will at least escape the other penalties associated with defaulting on a mortgage.