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A Home Affordable Refinance Program or HARP will be available to 4 - 5 million homeowners who have a good and solid payment history on an existing mortgage owned by Fannie and Freddie Mac. Under this program, a homeowner who is regular on mortgage payments, but unable to refinance to a lower interest rate because of a decrease in home value, will be able to refinance. These homeowners will be eligible to refinance their loan to take advantage of today's lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a long term fixed rate loan.
Refinancing into a new loan below the home's market value allows a borrower to have equity in their home, thereby saving the borrower from a position of being underwater. Refinancing does not reduce the principal amount owed, but refinancing saves money by reducing the amount of interest that a homeowner pays over the life of the loan. The main objective of Refinance program is to help borrowers get into more affordable loans. Homeowners who are paying interest only, or who have a low introductory rate that will increase in future, may not see their current payment go down when they refinance to a fixed rate and payment. However, these homeowners can save a great deal over the life of loan by avoiding future mortgage payment increases.
The Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program to homeowners who are regular in their mortgage payments. Qualified borrowers whose mortgages are presently owned or guaranteed by Fannie Mae and Freddie Mac will be allowed to refinance those loans according to the terms of the Refinance program. Fannie Mae and Freddie Mac already have the borrower's information on file, so documentation requirements are not likely to be difficult. In some cases, an appraisal will not be necessary. This can make the refinance quicker and less costly for both borrowers and lenders. The HARP is scheduled to end in June 2010.