U.S. homeowners will now have two extra years to refinance loans through the government’s Home Affordable Refinance Program, or HARP, according to a news release last week.
“More than 2 million homeowners have refinanced through HARP, proving it a useful tool for reducing risk,” said FHFA Acting Director Edward J. DeMarco in a statement. “We are extending the program so more underwater borrowers can benefit from lower interest rates.”
The initiative was originally designed to help struggling homeowners refinance into loans with lower interest rates, resulting in lower monthly payments and hopefully, fewer foreclosures. HARP offers mortgage relief to homeowners whose loans are backed by Fannie Mae or Freddie Mac and are still current on their payments.
In order to qualify, borrowers must also not have missed any payments in the past six months and had no more than one late payment in the past year. The loan must also have been originated before May 31, 2009 and have a loan-to-value greater than 80 percent.
Underwater borrowers have especially benefited from HARP with a total of 2 million so far. Still there are roughly 14 million homeowners who still owe more than their homes are worth, leaving them stuck in their homes until they refinance or prices rise much higher.
“Given the far-from-normal housing environment we’re in, any option aimed at helping underwater borrowers is important, especially with interest rates at historic lows,” Stan Humphries, Zillow’s chief economist, said in a U.S. News & World Report article. “The success of HARP depends on low interest rates. [Rising interest rates] will have an undeniable effect on demand for housing, as homebuyers will have to spend more of their incomes to buy a home.”
Eligible borrowers now have until the end of 2015 to take advantage of HARP help.