For homeowners who are underwater on their mortgage, a HARP
refinance is like the pot of gold at the end of a rainbow.
Unfortunately, it can be just as elusive.
HARP, of course, is the Home Affordable Refinance Program, a
federal initiative designed to enable borrowers with little or no
home equity to refinance their mortgages at today's low rates. The
program allows you to refinance even if you owe more on your
mortgage than your property is worth.
Many borrowers complain that they meet all the requirements for
HARP, but their mortgage company still turns them down. Some report
going through drawn-out application procedures only to be turned
down at the end. Some have applied multiple times as the program
has loosened its guidelines, only to be turned down each time.
So what can you do?
Your current mortgage company
The first place most people start when applying for a HARP
refinance is with their mortgage servicer. Your mortgage servicer
is the company you send your mortgage payments to every month. They
may not be the lender you originally obtained your mortgage from,
but they're the ones who are currently handling your account.
If you can do so, getting a HARP refinance through your current
mortgage servicer is often the easiest way to go. For one thing,
you already have an existing relationship with them. For antoher,
many lenders will do HARP refinances only for their current
mortgage customers - if your loan is serviced by someone else,
they'll turn you down.
What about other lenders?
Just because your current mortgage servicer denies your
application for a HARP refinance doesn't mean you're out of luck,
however. HARP guidelines specifically allow you to refinance your
low-equity or underwater mortgage with any lender who will accept
Finding lenders who accept HARP refinance applications from new
customers can be a challenge, however. This is due in part to the
fact that many of the biggest mortgage lenders - the first ones
you're likely to think of when considering other refinance options
- are often the ones who will only do HARP refinances for existing
customers. So if they're the ones who are calling, and you keep
getting turned away, you might quickly assume no one else will take
Small banks, credit unions and mortgage brokers
You might find you'll have better luck with small- and
medium-sized lenders. These include regional banks, savings and
loans, specialty mortgage lenders and certain credit unions. Some
of these are quietly opening the door to refinancing other lenders'
loans through HARP.
To find the right lender, you might consider going through a
mortgage broker. Mortgage brokers don't actually make loans
themselves, they work with a large number of lenders with different
lending programs and requirements. They can be quite useful in
arranging mortgages for borrowers with particular lending needs,
and a HARP refinance certainly fits that description.
Lenders have different guidelines
Remember that even though the overall eligibility guidelines for
HARP are quite generous - no limit on how far underwater your
mortgage is, refinancing is allowed on loans with mortgage
insurance, no minimum credit scores - the program is still a
voluntary one for lenders. That means they may have their own
guidelines, or overlays, for what type of loans they will
One of these overlays may be that they will only accept existing
customers. Another may be a limit on far underwater a mortgage can
be for them to still refinance it. They may have credit score or
income requirements as well.
Are there changes you can make?
The point is, these standards vary from lender to lender. Just
because one lender - particularly your current mortgage servicer -
tells you that you don't qualify for the program, that doesn't mean
you won't qualify with a different lender. Finding the right one
may take some digging around though, which is why a broker may come
If a lender turns down your HARP application, try to find out
why. Sometimes, you can use that information to make changes that
will allow you to qualify. Maybe you're carrying too much debt.
Maybe you need to improve your credit. Maybe you need to reduce
your loan-to-value ratio to a level the bank will accept.
Three rules you can't avoid
That being said, HARP does have certain guidelines that all
participating lenders must follow, regardless of their own
overlays. If you don't meet these, you can't qualify for a HARP
refinance no matter which lender you go to.
First, you have to have a mortgage guaranteed by Fannie Mae or
Freddie Mac. That's fundamental. The program is operated through
these two guarantors, both of which are in government receivership.
But if they don't back your mortgage, they can't help you.
Fortunately, the majority of residential mortgages in the U.S.
are backed by one or the other. Both have tools on their web sites
) where you can immediately find out if your mortgage is guaranteed
by them. The VA and FHA have their own programs for refinancing
Second, you must be current on your mortgage payments, with no
late payments in the past six months, and no more than one in the
past year. Third, your mortgage must have been acquired by Fannie
Mae or Freddie Mac prior to June 1, 2009.
Getting a HARP refinance can be a frustrating process - but
lenders are approving thousands of them every month. Don't give up
just because your mortgage servicer or the first few lenders you
contact turn you down - the right lender may still be out there for