The clock is ticking on HARP, the federal program designed to help underwater and low-equity homeowners refinance their mortgages. With the program due to expire at the end of next year, the Federal Housing Financing Agency (FHFA) is undertaking a new push to reach borrowers who could still benefit from the program.

Now in its fifth year, the program has helped more than 3 million homeowners refinance their mortgages to take advantage of lower interest rates. While refinance demand has fallen off as rates rose from their historic lows, the FHFA estimates there are still some 676,000 eligible borrowers with a "refinance incentive" who could benefit from the program.

$2K-$3K annual savings estimated

The FHFA estimates these borrowers could save $2,000-$3,000 per year by refinancing through HARP. The new outreach program will focus on cities with high numbers of eligible borrowers thought to be "in the money" who could realize significant savings from the program.

"We know that there are hundreds of thousands of borrowers who can still benefit from HARP and are essentially leaving money on the table by not taking advantage of the program," said Mel Watt, FHFA director. "By engaging directly with local community leaders, faith-based organizations, local elected officials and lenders, our goal is to leverage these trusted sources to reach as many 'in-the-money' borrowers as we can."

Who would benefit most?

The FHFA considers HARP-eligible borrowers to be "in the money" if they still owe at least $50,000 on their mortgage, still have at least 10 years to go on their mortgage term and are paying a rate at least 1.5 percent higher than current market rates.

Those aren't requirements for the program itself, but instead describe the type of borrower most likely to benefit from a HARP refinance.

Eligibility guidelines

To qualify for a HARP refinance, it doesn't matter how far underwater on their mortgage a borrower may be - there's no limit on negative equity. Low-equity borrowers may also be able to qualify if they have less than 20 percent equity in their home.

The other main requirements are that the mortgage must be backed by either Fannie Mae or Freddie Mac, it must have been originated on or before May 31, 2009 and that the borrower must be current on their mortgage payments with no more than one late payment in the last 12 months and none during the last six.

Many homeowners also use HARP to shorten their mortgage term to a 15-year loan in order to pay it off faster, though those wishing simply to lower their monthly payments can also re-extend it out to a new 30-year term. 20-year terms are available as well.

Borrowers may apply to refinance through their current lender if they wish to do so, but the rules of the program allow them to refinance through any participating lender. Those applying must still meet the lender's loan requirements for credit scores, employment and debt-to-income ratios.

The program is currently set to expire after Dec. 31, 2015.

Published on June 25, 2014