Underwater Mortgages and Refinancing With H.A.R.P.

Written by Anthony Garcia   // December 6, 2011   // 3 Comments


Housing prices across the United States continue to plummet and it is estimated that over 11 million Americans owe more on their home loans than what those houses are actually worth. In mortgage terms this predicament is known as being upside-down on your home, it can cause a lot of stress and can make it nearly impossible to think clearly on what to do next. For underwater homeowners, the government has just recently improved your chances of solving this dilemma with the re-introduction of the H.A.R.P. program. H.A.R.P stands for the Home Affordable Refinance Program. Originally introduced in 2009 after the mortgage bubble burst, it has been updated to now include even more Americans refinancing on their underwater loans. Getting a refinance with record low interest rates and reducing your monthly mortgage payment can make a big difference.

Let’s first discuss how H.A.R.P. works. With H.A.R.P. lenders will be able to help you refinance your existing mortgage when your loan-to-value is more than 100%, meaning you owe more than the value of your home. For example, your loan (mortgage amount) is $400,000 and the value of your home (current appraised value) is $300,000 your loan-to-value is 133%. In order to qualify for H.A.R.P. your current mortgage loan must be guaranteed by Freddie Mac or Fannie Mae and the loan has to have approved before June of 2009. Financial education site Bills.com has a great video about the H.A.R.P. program, how it can help and whether or not you qualify.

In the event that you are unable to qualify for the HARP program, you may still be able to take advantage of other refinancing programs available to home owners in certain circumstances.

The first is the Federal Housing Administration Short Refinance program. It is very important to note that to qualify for this program, your current mortgage cannot be an FHA loan. This program requires that your lender reduce your principal balance by at least 10%. This amount might not seem significant, but the lower monthly payments could reduce some pressure on your monthly expense budget. Make sure to contact your lender about the FHA Short Refinance program because most mortgage lenders have chosen not to participate so it is important to find out if your institution is participating. This Program is ending December 31st 2012, so make sure to contact your lender immediately.

The second option to consider is a Federal Housing Administration Streamline Refinance. This is a great option if you are currently in a FHA loan.  You may be able to refinance your underwater home and the lender may not require an appraisal. Not requiring an appraisal could save you time and money in the short term, especially with the Holiday season in full swing.

The final refinancing program option is a Veterans Administration Streamline Refinance. This VA streamline refinance program has no loan-to-value maximum limit meaning you could potentially be 200% underwater and still qualify. Also with this program there is no appraisal required if you currently have a VA loan.

It is also important in this discussion to remember to reach out to your lender about a Loan Modification. Each financial institution and mortgage lender has different criteria and eligibility requirements for me to list here, but the important thing to do is ask. By approaching your lender you accomplish several thing including making them aware that there is a potential problem with the terms of the loan in their current state. Secondly, it affirms to your lender that you are willing to work with them before reaching out to a third party or government program.

All these options are a great way to refinance your existing mortgages if you are struggling to meet your monthly mortgage payments. As we all know even a monthly savings of 10% can make all the difference in today’s economy. Just because you are upside down on your mortgage does not mean you will lose your home and there are still ways to refinance if you do a little research and invest some time.


  1. By Mark Chen, January 23, 2019

    HARP looks like a great opportunity for millions of underwater homeowners, who have been paying their mortgage on time, to refi at doay’s low rates, but it is not going to help the vast majority of underwater homeowners. I don’t know the solution, but some sort of principal forgiveness seems to be in order, perhaps one where any future rise in value is shared between the lender and the homeowner.

  2. By Mantra, January 23, 2019

    This program is of great advantage for people who bought their property before June 2009. In this struggling economy, our Government should come up with great programs like this to help homeowners and consumers fulfill their dreams

  3. By DolrDolrBill, January 23, 2019

    I don’t have a mortgage, but this article is a great resource for folks out there that do not know what their options are. The housing market needs a jump start and it is good to see that people may be able to utilize one of these ways to stay in their homes.


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