Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 28, 2012

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One of the largest problems with the original Home Affordable Refinance Program (HARP) was that people couldn’t qualify for it.

Despite HARP’s intentions to help homeowners, it was riddled with restrictions and requirements that very few could meet. Now, however, HARP 2 has had its requirements reduced, which should allow for many more home loans to be refinanced.

The eligibility requirements for HARP 2 are:

  • Borrowers’ home mortgage loans must be owned or guaranteed by Freddie Mac or Fannie Mae.
  • The mortgage must have been acquired by Freddie or Fannie on or before May 31, 2009.
  • The home loan cannot have been refinanced under the original HARP unless it is a Fannie-backed loan that was refinanced under HARP between March and May, 2009.
  • The loan-to-value (LTV) ratio must be greater than 80 percent.
  • Payments on the home loan must be current, with no late payment occurring in the past six months and no more than one late payment in the past 12 months.

One notable change that has occurred between this program and its predecessor is that the LTV ratio only has a minimum requirement, and no maximum for fixed-rate mortgage loans. Previously, borrowers could only apply if they had an LTV lower than 125 percent, which was very uncommon after the housing market collapse.

For instance, if a borrower had a fixed rate mortgage loan carrying a balance of $130,000 on a property appraised at $100,000, they would not qualify for the original HARP. It is because of that LTV ceiling that the original HARP failed as it did.

But with HARP 2, that borrower would now qualify. In fact, if that borrower had a balance of $300,000 on a $100,000 home, they would still qualify under HARP 2—which is great news for all fixed rate victims of the meltdown.

Adjustable rate mortgages, however, still do have an LTV cap of 105 percent.