Launched in February 2009, the government’s $75 billion Making Home Affordable Program was started with the mission of strengthening the housing market and the economy. The program offers refinancing and loan modification options to eligible homeowners, helping them stay in their homes. The loan modification option is covered by the Home Affordable Modification Program (HAMP) while the refinance option is part of the Home Affordable Refinance Program (HARP).

HARP allows homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance and lower their monthly mortgage payments. While banks usually require homeowners to have at least 20% equity to qualify for refinancing, this proved to be a problem during the current crisis, where homeowners have been faced with falling home prices. Under HARP, which expires on June 10, 2010, homeowners are given access to low-cost refinancing to help them get out of adjustable-rate mortgages and into more affordable and stable loans.

To be eligible for refinancing under HARP:

a)      The existing mortgage loan should be owned or guaranteed by Fannie Mae or Freddie Mac.

b)      At the time of applying, the homeowner must be current on his or her mortgage payments. Homeowners are not considered “current” if they are late on mortgage payments by over 30 days or missed a payment in the past 12 months.

c)      The amount homeowners owe on their first lien mortgage should not exceed 125 percent of the current market value of their property.

d)      You must own or occupy a home between one to four units. This includes those who own and occupy a property that is a single-family home, condo, duplex, triplex or four-unit house.

e)      Homeowners should have a reasonable ability to pay the new mortgage payments.

f)        Refinancing improves long-term affordability or stability of a homeowners’ loan. This is determined by the lender when you submit a loan application. The lender will provide a “Good Faith Estimate” and a “Truth In Lending Statement” that includes your new interest rate, mortgage payment, closing fees and the amount you will pay over the life of the loan. To determine if refinancing improves long-term affordability, compare this with your current loan terms. If it is not an improvement, then refinancing may not be the right option.