The End of HARP: What Replaced It and Why

 The Home Affordable Refinance Program (HARP) was a housing crisis lifesaver, enabling millions of homeowners to refinance their mortgages when banks wouldn't. But like all government programs, it had an end date. The home affordability refinance program expired in 2018. Many homeowners were left wondering, "Now what?" Let's see what happened next and why.

Why HARP Was Created

HARP started in 2009 as a response to the 2008 financial collapse. There were underwater homeowners at that time with millions of them owing more on their home than their home was worth. Mainstream lenders would not lend to them. HARP stepped in and gave these homeowners a chance to refinance to cheaper loans.

The Program's Sunsetting

HARP was never meant to be permanent. As the housing market recovered and home values crept back up to pre-crisis levels, fewer and fewer homeowners were underwater. By the time 2018 rolled around, demand for HARP had dwindled considerably. It faded into the background quietly on December 31, 2018.

What Replaced HARP?

Although the home affordability refinance program closed, there was still demand for a refinance option for high LTV borrowers. That was where the new programs came in.

Fannie Mae introduced the High LTV Refinance Option, for those who are current on their payments but whose home value still disqualifies them from a conventional refinance. Freddie Mac introduced the Enhanced Relief Refinance Mortgage.

These new initiatives brought most of the same benefits to HARP;

· Lower interest rates

· Fewer loan terms

· Lower monthly payments

· No mortgage insurance needed if it wasn't needed to begin with anyway

The key difference? The new loans had tougher terms. Borrowers must be current on payments with no recent payment that was past due and no more than one recent late payment.

Why Did Things Change?

HARP was a lifeline for distressed homeowners. By the time the program expired, the housing markets had largely recovered. Lenders and regulators shifted their attention to making certain that any new refinance program would be for responsible borrowers with good payment history but who were still being denied traditional refinancing because of LTV concerns.

The Legacy of HARP

HARP may be done, but its legacy continues. It showed the ability of mass refinancing programs to calm markets. It also led to the creation of more flexible options for borrowers who need them but don't qualify under regular lending criteria.

Last Words

The death of the home affordability refinance program was not the end of help for homeowners. It evolved into a new breed of targeted refinance programs designed to help responsible borrowers secure better terms. If you were left out of HARP, find out if today's high LTV refinance programs are for you.

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